How A Korean Immigrant Built Cash Flow With ADUs, Airbnbs & Boutique Hotel | Alex Kang E31

In this powerful episode, Ryan sits down with entrepreneur Alex Kang to unpack his unbelievable journey from immigrating alone at 15 to building real wealth through ADU investing, Airbnb arbitrage, and eventually acquiring a 24-unit boutique hotel in California.

Alex reveals how leaving his corporate CPA job forced him to rethink what financial security, ownership, and freedomreally mean. This episode hits everything from real estate strategy, seller financing, hotel investing, the collapse of Airbnb profits, and why immigrants often outperform because of their relentless grit and resourcefulness.

If you're interested in entrepreneurship, real estate, private equity, or creating true multiple income streams, this episode will hit you hard.

Paradyme

Episode Transcript

SPEAKER_01 (00:40):
Hey everybody, Ryan Garland here, founder and
chairman of Paradigm.
Welcome to the Paradigm ShiftPodcast.
And I am honored today.
I have Alex Kang, but he reallyactually says it by Kong.
Yes.
Because you are Korean andthat's the right way to say it,
but all your white friends sayKang.

SPEAKER_00 (00:54):
I'll respond to all of them.

SPEAKER_01 (00:55):
There you go, right on.
But Alex is uh uh an amazing,genuine, genuine gentleman.
Um kind of the way to bring thisup is that him and I met in
Toulon.

SPEAKER_02 (01:05):
Yeah, two weeks ago.

SPEAKER_01 (01:06):
Yeah, two weeks ago, and we just totally hit it off,
and I had a chance to speakthere.
And he had a lot of good uh hehe's one of the guys that has
two ears and one mouth.
And I really want you to hearkind of his background because
he came from the corporate worldand uh really kind of stretched
out his arms and decided to getinto the entrepreneurship and
and business ownership.
And he has a CPA background, andI'll let him speak for himself.

(01:26):
But you know, I think that'sreally important because I use
CPAs, I love those corporateguys, I need them in my private
equity space.
But to see him venture out withthat type of caliber and
knowledge and how he'simplementing that into business
strategy is really important.
That's the whole point fortoday.
So, Alex, thanks for coming,buddy.

SPEAKER_00 (01:42):
Well, thanks for having me.
Appreciate it.

SPEAKER_01 (01:44):
Cool.
So let's dive in.
So I'm gonna bring this up and Iknow I asked you about one
thing, but I want my audience toget to know you a little bit
more just from a personal side.
What's the hardest thing you'veever had to overcome?

SPEAKER_00 (01:54):
Yeah, I know you asked me that question two hours
ago.
So I had to, I've been I've beenthinking about this a little
bit.
Um, but you know, I think Ithink like really what set me as
the, you know, what gave me thefoundation of who I am today was
when I decided that I would movefrom Korea to Canada.
So my immigration story, really.
Um, you know, kind of a typicalimmigration story, but um, you

(02:15):
know, I was in middle school, Iwas just studying in Korea.
I was born and raised in Korea.
Um you came over?
Uh I was 15, 14, 15.
And you went to Canada first.
I went to Vancouver from Korea.
Um, but I went by myself for thefirst year and a half.
So my family asked me if Iwanted to move.
I told them honestly, I thinkit's just kind of a uh a pattern

(02:36):
of my story when people just askme, like, you know, if I'm
interested in doing it, or ifyou if you ask me if I can come
out, um I my default is justsaying yes.
Because I think a lot of it justkind of opens a lot of uh
opportunities and doors for me,at least in my experiences so
far.
And back back then, I honestlydidn't know what Canada really
meant, like living in Canadareally meant, but I said yes
because I felt like that wasgonna give me better

(02:57):
opportunities.
I didn't know what that reallymeant.
Um, but went by myself becausemy family wasn't ready for about
a year and a half.
Basically, I was I was uhscoping it out for the family,
if you will.
Sure.
After a year and a half, my mymom and my brother came.

SPEAKER_01 (03:10):
Which by the way, that's very common, right?
You kind of come out here, kindof get the lay of the land.
You gotta start sharing withyour family some of the things
that are going on over here andsee if you can bring them in,
right?
Exactly.

SPEAKER_00 (03:18):
Yeah, well, if you're like a little bit older,
I think that's a little bit morecommon.
If you're young, young obviouslyyou know, whole family moves
together.
Um, but I was in the middleschool, I just finished up
middle school in Korea, so I wasstarting grade 10.
Uh actually, funny story, Inever had grade nine in my life
because I finished grade eightin Korea, and the the way the
school system works in Korea andhere is a six-month uh

(03:39):
difference.
So uh in Korea you start schoolin March.
Here you school in in September,October time frame, right?
So I came to I went to Vancouverand then I I spent the first
like three, four months inlearning English, so I didn't go
to school directly.

SPEAKER_01 (03:53):
Got it.

SPEAKER_00 (03:54):
And then because of that, I just completely skipped
uh a grade nine and then wentinto grade 10.
Um so did my high school firstyear, my family came afterwards,
but shortly after that I went upto Montreal for college.
Um, but you know, during thattime I didn't know what I had
signed up for.
Um, but that was probably themost challenging part.

(04:14):
I didn't know anyone inVancouver, I didn't have any
family, I didn't have anyfriends, uh, I didn't speak the
language.
I had no, I I really just didn'tknow what I was uh uh assigning
up for when I went to Vancouver.
So you know I remember just likethe first year being very like
lonely.
I didn't really have friends, Ididn't know what was going on.
A lot of times like I would youknow go to class, and but I

(04:36):
didn't know what the homeworkwas.
I still didn't know what I wassupposed to be doing.
Um, but they gave me kind ofjust a lot of um just motivation
to just like you know, if I justif I were gonna be successful
and if I were gonna get throughthis, I'm gonna have to put a
lot of effort and and and andand time into it.
So from that time on, my justdefault has always been like if

(04:57):
it takes 100 to achievesomething for most average
people, I'm gonna put 200 or 300into it.
And that's just been mymentality so far.
Um, and every time I kind of getthrough or am I, you know, I'm
I'm faced with any sort ofchallenges or harsh is my
default mode has mode mode hasalways been like I'm gonna put
just 2x and 3x into it and getthrough it.

SPEAKER_01 (05:18):
You know, let's let me stop you right there because
that's something I've beentalking about on other podcasts
for a long time.
And I'm sorry, but I wanted tobring that up because that's a
really good for you know whenpeople I think naturally when
things get tough, they put theirhead in the sand, right?
They kind of backpedal and theygo, I don't want to do it.
But when you are trying to getin to move your life around from
Korea into the US or into adifferent country, like that's a

(05:39):
different commitment, right?
And that's also to your familybecause it's it's so much
different.
I think there's a that's a wholedifferent drive that I think a
lot of people in in our countryhave no idea the type of
commitment and how much you haveto push forward.
So therefore, what you've whatyou've had to experience by
coming over here, yeah, you'vefigured that out to implement in
all other aspects of your life.

SPEAKER_00 (06:00):
Yep.
Yeah.
So that's been really thefoundation to your point.
So um, you know, so Montrealmoving from Canada to to to LA,
that was about 10 years ago.
Kind of similar mentality.
You know, I if I did from Koreato Canada, I I can surely do it
Canada to US.
And it came with differentchallenges and and and different
you know aspects of life, buthaving gone through it a a

(06:21):
couple times and definitely gaveme the motivation and the
foundation to say, hey, I'mmoving, I've been in corporate
for the first, you know, lastlike 15 years.
I'm now moving intoentrepreneurship and buying
businesses, and we can we cantalk about that a little bit
more.
But it just kind of gave me thatthe confidence that like I don't
know what I'm really signing upfor, but if I just stick with
it, if I can be resourceful, ifI can learn from others who've

(06:44):
done it, surely there's a way toto get through it.

SPEAKER_01 (06:47):
Yeah, absolutely.
You know, I I I like the factthat you brought that up.
So when did you actually getinto when did you come to the
US?
And how old were you?

SPEAKER_00 (06:55):
I came to US, I came to LA from Montreal about 10
years ago in 2014.

SPEAKER_01 (07:01):
Got it.

SPEAKER_00 (07:01):
Um, that was to so just to kind of backtrack a
little bit.
I started my career as a CPA.
Um, and honestly, I think thatwas like more of a safer choice
that I had back then.
I was barely speaking English inhigh school, so I was like,
okay, I gotta find a job thatdoesn't require a lot of English
skill set.
And I was like, okay, what aresome of the jobs that required
numbers?

(07:21):
And there was banking, and therewas CPA job, and I was in I was
in uh a business administration.
I graduated college in 2010, andas you know, 2008, 2009, there
was no banking jobs, right?
Like everyone was getting fired.
Oh, yeah.
So in Canada, investmentbanking, there was I still
remember there are like two orthree investment banking

(07:44):
internships across the wholeCanadian banking system.

SPEAKER_01 (07:48):
Got it.

SPEAKER_00 (07:48):
And I was like, okay, wow, I don't think I'm
smart enough to be the top threein Canada.
Like I think I knew that aboutabout themselves, about myself.
Yeah.
And I was like, okay, what isthe next thing?
And the the CPA firms are likethey were still hiring 20 to 30
uh people per office.
So Montreal, Vancouver, andToronto were the three top
offices, and every big four wasstill hiring maybe like 10, 20

(08:11):
up to 30 people per class.
So that gave me like stillsomewhat of a good chance.
And and and you know, I thinkmaybe just being creative
myself, um, I've always beenstronger in numbers than than
other areas.
So that's where it felt like youknow, I I that's a that's a job
that's that's conservative, um,that it's going to be at least a
good starting point.

(08:31):
Uh so I signed up for it.
But you know, two or three yearsafter the job, I I quickly
realized that wasn't something Iwanted to do for the rest of my
life, the rest of my life.
And also the my my startingsalary was I can kind of you
know laugh about it now, but itwas 30,000 Canadian dollars.

SPEAKER_01 (08:48):
Yeah.

SPEAKER_00 (08:48):
And and that is just not enough to be able to sustain
my life.
Also, funny enough though, likelong story short, if I kind of
just stuck with the CPA job, Ithink I could have the outcome
also could have been a littlebit different in that because I
was looking for CPA firms to buyat some point, but we can we can
talk about that a little bit.
But um so it really kind of gotme to like to figure trying to

(09:10):
figure out after two, threeyears of CPA, what other path
can I explore that is gonna getme out of the kind of auditing
CPA job.
And and I saw really two pathsthere.
One was a lot of people exitinginto corporate finance and exit
into kind of being an accountantand at a corporate job.
And and when I was looking atit, looking at them, I was like,

(09:32):
I don't know if that's the lifethat I design that that that I
desire in the next like next thenext like five to ten years.
Um I guess there's a reallythree parts.
One and the second part is thatif I if I stuck with the CPA
job, then I'm looking at lookingat the partners and other senior
partners.
I'm like, do I want that life inmy life?
And and the answer was obviouslyno.

SPEAKER_01 (09:50):
Yeah.

SPEAKER_00 (09:51):
So number three was I just had always this I don't
know, notion of coming to theUS, an American dream, and maybe
I got sold a little bit.
Um, but uh, you know, I justalways wanted to come to the US.
And uh MBA was a really the goodtool.
And really one of the only waysthat I found to be able to come
to the US on a student visa uhwas to get my MBA.

(10:11):
So started prepping for MBA,took the GMET and all that, uh,
got into UCLA, that's where myMBA.
Um, and I still didn't know whatI wanted to do.
So I signed up for a consultingjob.
Um and you know, to me that yougotta do, man.
Yeah, to me that was like, okay,if I did it, because like really
I've been only exposed toaccounting world, and I don't

(10:34):
know, I didn't even know whatkind of functions or jobs are
out there.
Um, so I just wanted to go outthere, learn as much as
possible.
Consulting felt like the most anatural path to do it.
So did that for another fewyears.
Um, and then over the last fouror five years, I was in the
software space.
Um, and then uh, you know, Ithis year, February of this

(10:54):
year, I left my W 2 and doingand starting doing my own
things.

SPEAKER_01 (10:57):
And that was gonna be my next question kind of
segment going into this.
So, what made you really want tostep out of that corporate
secured income kind of job?
I mean, obviously I could see itin your eyes.
You just you're builtdifferently.
And for those of the of you thatare listening to this, when you
see this man, you'll see what Imean by that.
But I can tell you're just youyour mind is running the whole
time you've been here.
You're like, what else can I do?

(11:18):
How am I, you know, I want togrow my business.
And and you have some uhexperience from ADUs and you
know, um, your hotel, and I wantto talk about that, you know.
So let's kind of just give us,give me a little background on
what made you want to ventureout and how hard was you was it
to actually pull the trigger.

SPEAKER_00 (11:35):
Yeah, yeah.
So I would say there areprobably two different triggers
that I had.
One was uh when I realized thathaving one sole income stream
wasn't not so it's not so secureanymore, right?
Like I felt like having W-2salary was the most
conservative, secure thing inthe world.
But when I realized, especiallywhen I saw a lot of my talented

(11:58):
friends getting layoff duringthe crazy tech layoff in 2020,
2021, 2022 timeframe.
And I I that's when that thatwas sort of a wake-up call for
me.
Like it's not really about howgood they are, how bad they are,
it's really all about thebusiness from the company
perspective, and they'll they'llget laid off, right?
Like it's just uh uh you know,it's a it's an expensive, uh

(12:18):
dispensable uh to to thebusiness, to the to the uh to
the companies.
Yep.
So I started seeing that alittle bit.
And then number two was um uhyou know, when I was still
working on my corporate, Istarted building my own stuff.
You know, granted, it was asmall project.
When I bought my first house,um, you know, I I we were joking
a little bit like with we'rerecording this in the uh in your

(12:41):
men cave.
Um, but when I first bought myhouse, I had a two-car garage,
and I really wanted to convertthat two-car garage into a golf
simulator and kind of build asmall man cave myself.
But uh, you know, I had noassets, I had nothing.
I you know, really the logicalthing for me was to convert it
to something that's a little bitmore value-added, if you will.
So decided to build an ADUinstead.

(13:02):
Um, you know, went through theprocess.
Now I have a long-term tenant inthere, started giving me the
supplemental income for thefirst time that was not W-2
income.
And that was it's not reallydifficult to think about how
that can be life-changing foryou, but it was life-changing
for me because now I had certainpercentages of my total income

(13:23):
coming from this ADU rental, andthat was a wake-up call for me.
And and I really enjoyed theprocess of building the ADU.
Um, I really enjoyed having youknow my house appreciated value
because of the build, you know,addition of the ADU.
And that's when I started reallystarted doing a lot of side
hustles, if you will, right?
So did an ADU and the nextproject was uh did a couple

(13:46):
Airbnbs.
Um and then uh after theAirbnbs, I was thinking to
myself, like, do I continue todo I want to continue to build
more Airbnb portfolio, or isthere something else can I do?
And then that's when I gotintroduced to the the concept of
hotel.
Um, and you know, it's it wasessentially just supercharging
Airbnbs and then havingmultiple, multiple Airbnbs under

(14:08):
one roof, that made just a lotof sense from just management
perspective.
It's just one deal, it's oneteam that's managing it, um, but
yet you're still getting thebenefits of having multiple um
um Airbnbs all together.

SPEAKER_01 (14:21):
So let's let me ask you this.
So with the with the um ADU,that's been a big movement right
now.
I mean, we have you know privatelenders that are providing
capital for people who just wantto drop ADUs in the back of
their property.
And for those of you that don'tknow what this is, ultimately
it's a dwelling that you can popdown in the back of your home.
And in LA, which I'm gonna askyou some questions because
you're gonna know more about itthan I will.

(14:42):
But in LA, let's just say kindof the old way of development,
they were kind of you knowskinnier lots where you'd have a
detached garage in the back,right?
And then people would over timestart remodeling it, tie the
houses together, build a pool,or put an ADU in or both, right?
And so therefore, it became sucha big movement for cash flow,
kind of a granny flats, kind ofan extra dwelling.
You can rent it out, you can getmore square footage and sell the

(15:05):
whole property for more for asmall investment.
So let's talk a little bit aboutthat because I haven't had
anybody in uh on my podcast yetthat had experience in ADU.
Okay.
So just give us a littlebackground on ADU and kind of
what you uh experienced on thatinvestment.

SPEAKER_00 (15:19):
Sure.
I I think ADU is probably one ofthe safest investments that you
can make, if especially if it'syour primary home.
And the reason I say that isbecause my experience with my
ADU is that to your point, itwas uh a single family house.
We don't detach garage.
It was it's you know, our garageis two-car garage, about 500
square feet.
Not not a big not a big standardtwo-car garage.

(15:42):
Yeah, standard two-car garage.
Um, I could have converted intogolf simulator in the main cave,
and they probably wouldn't haveany added value to my house.
Now that because I've gonethrough the process of actually
getting permitted and then doingthe construction, what that did
was that now the 500 square feetof the ADU is getting added to
my entire house um squarefootage.

(16:04):
And as a result of that, thevalue per square footage has
gone up uh because now I'veadded about 20% of the entire
house with the addition of theADU.

SPEAKER_01 (16:15):
And what's crazy is that you know, I've done
thousands of loans throughprivate money, and a lot of the
a lot of it went when I wasfunding in LA was just doing
additions to the house to getthose type of additional returns
and increase in value.
But this is kind of one of thosethings where you can mitigate
this and and the headache andthe stress of remodeling,
because when you when you do anaddition, you're kind of

(16:37):
remodeling the whole house.

SPEAKER_02 (16:38):
Yes, you know.

SPEAKER_01 (16:39):
So if you have a house that's in decent
condition, sometimes you justwant to do paint carpet, you
don't want to pull any permitsfor that, you just drop an ADU,
you know, and then you'regetting immediately returns and
you can buy these things.
In some of the cases, you couldbuy these things and drop them
right in, and now you got thesquare footage, you just got to
pull your utilities and makesure you got grading done.
And so it's really with a smallinvestment, you can increase the
value of your house.
So it's kind of the same thingof flipping just another model.

(17:01):
So instead of just going in andflipping and doing again a full
edition and remodeling the wholehouse, you can literally come in
and drop an ADU and get anincrease in value.

SPEAKER_00 (17:09):
Absolutely.
So in terms of like a numbers,because I'm a numbers guy,
right?
Like in terms of the numbers, soI I made my investment back in
three years of renting it out.
So I made my money back fully.

SPEAKER_01 (17:19):
So once whatever the investment for the investment
for it was, you made it back inthree years.

SPEAKER_00 (17:23):
I made it back in three and a half years, so less
than three years.

SPEAKER_01 (17:26):
That's incredible.

SPEAKER_00 (17:27):
Yeah, so I mean, like if you just the cash and
cash, if I just put all the cashinto it, in which case I
actually did put because Ididn't actually know there's an
ADU loan and other productsavailable, I just didn't know
any better.
And I, you know, I have thesavings, I'm gonna put my own
money into it.
Um, I did it, but I you know, Igot my returns back.
So, you know, it's basicallyabout 35% cash and cash return
uh because I made the money backin in in about three years.

(17:48):
Um on top of that, um, I wasable to get a HELOC on my house
with the addition of the ADU.
Um, and now I have about 200 to250,000 of HELOC available.
I haven't tapped into it, butit's an emergency fund if I need
it.
Totally.
Um, you know, I can use it forthe low interest rate, low
interest rates.
Um, that is only possiblebecause yes, the house

(18:11):
appreciated a little bit, butbecause I was able to force this
uh depreciation through theaddition of the ADU, the the
bank who you know was acommunity bank and they looked
at us, oh yeah, like you've donea bunch of work for your house,
and now your value is thisbecause your comms is this.
Um and I was able to pull, youknow, at least have the line of
credit or HELOC ready to go.

SPEAKER_01 (18:29):
So in essence, you now have a line of credit and
you were able to get an increasein value, which now allowed you
to qualify for that HELOC.
So now you have cash at hand ifyou need it at a low interest
rate because you probably got ita few years ago when the rates
were low.

SPEAKER_03 (18:41):
Yep.

SPEAKER_01 (18:42):
Um, would you what would it let's look at it from a
perspective of okay, you madeyour your investment back in
three years off the cash flowand the rent, but what do you
believe the equity increase was?
What's the delta there?

SPEAKER_00 (18:53):
So I would say about so my house is 1500 square feet,
and that additional was 450, 500square feet.
Um so it essentially added 30%of the score total square
footage, and the last valuationthat we got, he added about 25%
of the total house value as anadditional date.

SPEAKER_01 (19:12):
And what what's the value of the house then?

SPEAKER_00 (19:14):
Uh so we bought it for 1 million.
Uh last time we got appraised,we appraised at 1.4.

SPEAKER_01 (19:20):
Yeah, so in like two years.
Yeah.
So so even though withappreciation, so yeah, about
let's just call it if you said30%, let's just call it$300,000.

SPEAKER_00 (19:28):
Exactly.

SPEAKER_01 (19:28):
So you made$300,000 plus you've made enough money
and cash flow in three years topay for the principal.
So let's talk about a hell of aninvestment.
And you nailed it.
How much was the how much didyou put into it?

SPEAKER_00 (19:39):
So it was just before COVID.
So I got I think I got luckedout with the with the timing.
That being said, my total costwas$75,000 uh with everything,
right?
Um all in.
All in.
Yep.
And now I'm getting rent for$2,100 a month.

SPEAKER_01 (19:54):
Dude, so$75,000 up front, you built it three years,
you've already made your moneyback, plus you got a$300,000
increase in value.
That's a hell of an investment.
Yeah, so that's why people goall in in this project.

SPEAKER_02 (20:06):
Yeah.
Yeah.

SPEAKER_01 (20:06):
Not only are you making your principal back, but
then you're getting that equityincrease.
So that's why it's also easierto raise equity capital for that
because it makes sense formultiple partners to get
involved.

SPEAKER_02 (20:15):
Yeah.

SPEAKER_01 (20:15):
So now it's just about acquiring the home, making
sure you can get qualified forADU, right?
So that's another thing thatpeople are doing is they're
going out and searching forhomes that can drop an ADU and
get that equity increase as ifyou were just flipping the
property and more and orremodeling and doing the ADU,
trying to really increase thosetypes of returns.
But I think there's somemoratoriums going on too in

(20:36):
certain areas about you knowhaving ADUs and so forth,
because cities, counties, andjurisdictions are starting to
catch on to that stuff, youknow.
And then you have neighbors thatget whine, depending on what
you're doing, you know.
Most of the older areas, theyreally don't care, but there are
areas that do.

SPEAKER_00 (20:48):
Yeah, you know, yeah.
I do remember when I first gotintroduced to concept of ADU, it
was starting to get a littlepopular, but it wasn't like
everyone was doing it.
But now it does feel likeeveryone's kind of doing it.
So I don't know what the scenelooks like now.
It is a little, it feels alittle saturated.
Yeah, but that being said, Ithink if you can buy a locate a
property with a detached garage,I think that's the most

(21:09):
economical way of getting it.

SPEAKER_01 (21:10):
Absolutely.
I've seen guys where they'retaking detached garages and
going up with an apartment.

SPEAKER_00 (21:15):
Oh, yes, absolutely.

SPEAKER_01 (21:16):
That's pretty smart.
Yes, especially if the garagehas good bones already.
Yes, you know, you can justre-engineer it, go vertical a
little bit, and you're, youknow, with 30,000, 40,000
investment, maybe a little more,you're pretty much set.
But you hit bedroom, bathroomcall it a day.
Yeah, you know, yeah.
More m where you spend a lot ofthe money is engineering and
plumbing.
Yeah, making sure it's allplumbed up because most of those
detached garages don't have anyof that.

(21:36):
So you got to plumb it, makesure you have a bathroom, so
forth.
So yeah, okay.
So then you went from ADU tohotels, or did you know you went
to Airbnbs?

SPEAKER_00 (21:44):
It's I did went to I did go to Airbnbs.

SPEAKER_01 (21:45):
So let's talk about that too, because Airbnbs is no,
it was a huge hype for thelongest time, and then it's kind
of went down and kind of up.
So let's talk about yourexperience with that, and then
you exited that to go into ahotel.
So this is that entrepreneurshipI was talking about, man.
You've been able to just shakethe you just rattle the cage.
So I love hearing all this.
So look, okay.
So let's talk about theexperience in a Airbnb.

SPEAKER_00 (22:05):
Yeah, so you know, even Airbnb, like again, like I
it's one of those things wherelike I got introduced the
concept of running an Airbnb.
Like, you know, I saw a lot ofpeople are getting profitable,
and I had some of my friendswere also doing it, and I was
like, okay, I'm just gonna goahead and do it.
I'm just gonna go ahead and doit.
So shortly after that, I thinklike two, three weeks after

(22:26):
that, I I located the property.
Uh by the way, I did an Airbnbarbitrage, so I didn't actually
buy the house.
I didn't have the capital toactually buy the house.
Uh so I did Airbnb arbitrage, sotwo properties.
Arbitrage, you know, for for forsome of the listeners who are
not familiar with the concept,is just because basically I'm
I'm I'm renting as a as arenter, and then I'm I'm
sub-leasing it as an as anAirbnb.

(22:47):
So arbitrage as in I'm paying along-term rent to my landlord,
and then I'm getting thearbitrage between what I'm
paying to the landlord um andand what I'm getting as a as an
Airbnb revenue.

SPEAKER_01 (22:58):
And do you have to disclose that to the landlord?
You do, yeah.

SPEAKER_00 (23:00):
So I got you have to get explicit permission in and I
I have that in my lease to saythat yes, I'm I'm permitted to
rent as a as an Airbnb rental.

SPEAKER_01 (23:09):
Got it.
How cool.
So okay, so you did you enjoyedit, but then you decided to
shift out of it.

SPEAKER_00 (23:13):
Yeah, you know, I think to your point, in 2020,
2021, 2022, a lot of people wereentering into the Airbnb space.
And and by the way, I'm I'm justas guilty as one of those people
who entered into the space.
Um, and and as any product orasset classes, it's all it's all
about supply and demand, right?
Like there's too much supplythat went into it in terms of

(23:35):
everyone getting into the Airbnbgame.
Also, during COVID in 2020-2021,everyone was desiring to stay at
different Airbnb in differentstages because everyone was
locked down.
As we all came out of COVID, thedemand went down because now
people were actually free to dowhatever they wanted to do.
The supply stayed the same, sothat meant Airbnb host power,

(23:58):
the control went downsignificantly in terms of the
pricing power, in terms of youknow what they can uh uh demand
to to the guest.
Um, so I was starting to seethat kind of uh inflection
point, like just like kick itoff a little bit, and that was
after my second Airbnb.

SPEAKER_01 (24:14):
Got it.
Um I would I ended up movingheadquarters out of California
into um Nashville, and Nashvillewas booming with Airbnbs.
I mean, all the way down topeople that were literally
developing, buying land anddeveloping an entire community
of Airbnbs through singlefamily, yeah, like the
build-a-rink community, but moreof the um you know Airbnb model.

(24:35):
So it was huge.
Another thing, too, thatdevelopers are doing.
I actually uh uh helped fund aproject out in Denver, and they
it was a five-story condobuilding where they sold all the
condos, but one floor was allAirbnb.
Yeah, I think that's in that.
Yeah, yeah.
That's which that was a goodmodel too.
Um, you didn't the thing thatthe thing was about that is that
people who live there full timedidn't want to live next to the

(24:56):
Airbnb partiers, right?
So they were on a differentfloor.
So it worked.
Yeah, um, and it and it waspretty cool because a lot of
lenders, you know, when you havethe capital markets that are
willing to back it and supportit, the likelihood of those that
type of asset class to expandgoes up because now you have
capital hit in the market forit, right?
So all these borrowers,operators, what have you.
So I was looking at how some ofthese projects were able to get

(25:19):
financed because the operatorwas going to implement Airbnb,
which typically increasesreturns, right?
Yeah.
So the hence the reason evenAirbnb.
Sure.
But according to whatever thedebt uh mortgage was and cash
flow and whatever your debt toincome ratio was, if you had you
know several of those units,Airbnb'd, it would qualify.
So now you're getting 20, 30million dollars in construction

(25:41):
loans because your overall modelwas to implement Airbnb cash
flow and strategy.
So I really watched from acapital market how Airbnb really
expanded, but as you nailed it,it was such a demand that it
people came in hot with it.
Big projects got funded with it.
I mean, it was a whole thing,right?
And then the the DSCR loans, youknow, a lot of times they were
like, hey, look, at first theywere funding the short-term

(26:03):
loans, no problem.
But then they started looking atit, and you probably know they
were underwriting on more of along-term comps, standard comps.
And as long as you have the DSCRratio, they'll fund it, even if
you're gonna go ahead and Airbnbit.
So you have to come in with moredown, whatever the number was,
right?
To make it make sense for theDSCR qualification.
So that was really impressive.
But what I've realized is thatit got saturated so quickly.

(26:25):
And then when when things kindof went back to normal after the
pandemic and people weren'ttraveling to those areas that
were open, that Airbnb modeljust kind of started
compressing.

SPEAKER_02 (26:33):
Yep.

SPEAKER_01 (26:33):
And now, with like for example, here at Paradigm
Storage, I have, I couldn't eventell you how many buyers 1031
exchanged out of short-termrental and came into more
long-term rentals.
The thing about storage was youdon't have turnover, you don't
have maintenance, you know, andyou can get pretty good returns
on it.
So if you look at it over time,you have less headache, less
stress, and then you havelong-term no turnover, and that

(26:56):
sometimes more comfortable forno, you're not making as much
money as an Airbnb, but you havethat steady cash flow with no
headache.
And that's where I think peoplekind of got.
It's really what happens is whenthe market shifts like that,
it's about retaining the wealthyou've created, not trying to
build too much of it.
So, like when the pandemic hitand everyone was pumping in the
PPP loans, oh my gosh,everyone's buying houses or

(27:17):
100,000 over asking price, ratesare super low.
It just went nuts, right?
Yep.
But as soon as those rates highuh spiked, everything started,
you know, people were coming outof stocks and things just kind
of went into more of cashpositions, and people just
wanted to retain that wealth.
So, yeah, all right.
So you went from Airbnb and youjust kind of felt what?
So just because you saw it godown and the income came down?

SPEAKER_00 (27:36):
No, I think my income when I decided that I
wasn't gonna do a third Airbnb,um, was really the decision
point or the three threedecision points for me.
One was do I continue to do theAirbnb arbitrage?
And that was not attractive intwo different ways.
One was the cash flow was good,but it was just purely a cash
flow play.
Like I wasn't getting any taxbenefits, I wasn't getting I

(27:57):
wasn't actually owning the theasset.
So after the two, it didn't, youknow, I didn't feel like that
was attractive enough.
And number two, I was juststarting to see because you know
the inflection point of uhAirbnb.
I can see in the next like maybesix or twelve months the cash
flow is gonna continue to comedown.

SPEAKER_02 (28:14):
Yep.

SPEAKER_00 (28:14):
Um, I was still in a disin like in a disinposition
when I when I exited, but it wasdefinitely not as profitable
when I first started.
And then number three was Ireally wanted to uh you know uh
uh start owning and and andthings and assets that I can be
proud of.
And then you know Airbnb, I youknow, to don't get me wrong, I
think Airbnb operators who arestill offering unique

(28:37):
experiences, unique designs, andI think you really have to be
like the top 10, 5, 10 in theAirbnb world to like really make
a lot of money now.
Um, I my Airbnbs were kind ofgeneric Airbnb, they were nice,
but they were not like unique innature or anything like that.
It was so I my Airbnb was one ofthose core targets that just

(28:57):
suffer from um you know more uhsupply and less demand.

SPEAKER_01 (29:01):
Gotcha.
You know, it's kind of crazy.
I was thinking about this theother day.
It Airbnbs can still be reallystrong in specific markets.
Like, for example, I was just upin Park City.
I went up there with my old man,him and I spent some time
together, went shooting and justyou know enjoyed our size.
We haven't done that in years.
So we were like, hey, let's goget away and you know spend a
little bit of time together.
So four days we spent, I think,a thousand bucks on an Airbnb.

(29:22):
That same Airbnb in February inPark City is$15,000 a week.
You know, these guys can makeall their money in their nut,
literally in just you know,during the winter up there
because it's you know that'swhat Park City's for.
And then you have Sundance, eventhough they're gonna move, it's
still like kind of likerecreating out there.
It's impressive.
But I mean, talk aboutcraziness.
So certain areas you could stilldo very well in Airbnbs.

SPEAKER_00 (29:45):
Yeah, I mean, like, I mean, yeah, exactly.
Like, you know, it's my myAirbnb wasn't like a 15 grand a
week type of Airbnb, but my ADRin the summer was 500, it will
go up to six six fifty a night.
Wow, and and funny enough, it'sit's mostly the the folks in
Arizona traveling to San Diegowho want to just get away from
the heat, and then they'll justpay whatever, right?

(30:06):
Because there's not enoughAirbnbs to stay in.
And they don't want to go tohotel, they want to stay in
Airbnb.

SPEAKER_01 (30:10):
Yep.

SPEAKER_00 (30:10):
Now the winter time comes.
My ADR is like 150.

SPEAKER_01 (30:14):
Oh, so just to get something in there.

SPEAKER_00 (30:16):
Yeah, it's just 150.
I'm barely kind of making therent, I'm I'm barely breaking
even.
So all my money extra profitcame during the summertime and
maybe some holidays.

SPEAKER_01 (30:26):
Got it.
So you try to keep keep a littlebit of a reserve just in case
you have some dry months.
Yeah, good for you.
Yeah, and I thought I think Inoticed too, like certain areas,
it's really about theexperience, is what it sounds
like to me.
You know, if you have like ahell of an experience or a lot
of rooms, and people can kind ofget a ton of people there over
the traveling for.
Friends and family, whatever.
That seems to be the ones thatare working.
Yes.
But those kind of hair, youknow, those just like you said,
that core kind of three-bedroom,two-bath stuff just isn't

(30:48):
trading that well.
Yeah, good.
Okay.
So from there you went over touh you went over to um uh
hotels.
Hotels.
Let's talk about that onebecause that one seems to be
pretty, pretty good for you.
And I know you're gonna look atbuying businesses, so we'll go
to that too, and then we'll kindof get sum it up.

SPEAKER_00 (31:01):
Sure.
Yeah, so the hotels was againlike it was more, you know, my
my decision point of moreAirbnbs or or something else was
really my my my different uhdecision point.
Um and um, you know, I gotintroduced to hotel um asset
class, I met Rich, uh which ishow we got connected also.
Yep.
Um, and um, you know, I think Ithink everything is really to me

(31:24):
is a it's a pay-to-play, right?
Like he had uh a community thathe was starting to start in uh
in terms of hotel investing andall that.
Um, you know, pay to play as inlike, you know, I I pay to be a
CPA, I I pay, I went to school,I pay for it, I I pay for my
MBA.
You know, every time I I feltlike I leveled up, I I I paid to

(31:44):
get in.
So I was like, okay, community,great hotel I know nothing
about.
I'm gonna pay to get into thecommunity.

SPEAKER_02 (31:49):
Yep.

SPEAKER_00 (31:50):
Um, so long as I I can justify to myself that
there's a return gonna bethere's going to be a return.
And that return to me was aslong as I buy one hotel from
just whatever I learn orcommunity or learning or people
that I meet through this group,you're gonna monetize it.
Yeah, it's gonna it's gonna payitself.
Sure.
Um, so it's kind of similarstory as like when I decided to

(32:11):
come to Canada.
When I saw when I met Ritz, liketwo days after I signed up, and
uh two days after I was in thegroup.
You know, it wasn't like a supercheap group either, but like it
was a decent amount ofinvestment.
But I was like, okay, I'm gonnaI'm gonna go there, I'm gonna
spend my next year or twominimum uh learning about hotel,
and then that this is how I'mgonna dedicate myself.
Um, and um, you know, I I gavemyself a year to buy a hotel.

(32:35):
Funny enough, I don't know,maybe it's like a goals and
timings kind of things, butliterally uh a year after I
joined a group, like 365 days.
I can't I can't even like joinlike like April 1, I joined
Richard's group, April 1 of theyear after I closed in the
that's great.

SPEAKER_01 (32:52):
And you said you gave yourself a year.

SPEAKER_00 (32:53):
I gave myself a year.

SPEAKER_01 (32:54):
So you really started searching how many how
many months before were youstarting to hunt?

SPEAKER_00 (32:58):
Uh so I joined a group in April.
Um, I really just spent thefirst like two, three months
just learning about thecommercial real estate lingo and
develop started developing, youknow what I didn't even know
what cap rate was, by the way.
Like so I didn't I I was reallynew to the space.

SPEAKER_01 (33:12):
Yep.

SPEAKER_00 (33:13):
So gave myself three months to like really study.
Um, and then after the threemonths is when I just started
calling brokers, like knowingstuff every day.
I was emailing, I was calling.
Um, I still had my W2, by theway.
So I had my day job.
So I I met a couple otherfriends who are now partners of
the hotel deal.
We met 7, 7:30 in the morningevery single day uh for an hour,

(33:35):
hour and a half.
Uh we would huddle, we wouldcall, we would email, and then 4
p.m.
we would meet again, 4 to 4 30,depending on when our day day
ended.
We would just do another blitz.
Yep.
And then we would do it for nextthree, four, five months every
single day.

SPEAKER_01 (33:49):
I literally just posted something yesterday on
social media because Ed Milettetalked about having like kind of
two jobs.
So from seven o'clock in themorning to 12, he was running
one business, and then from oneo'clock after lunch to six or
seven o'clock at night, he rananother business.
So that's cool.
You did it before and afterwork, is what it sounds like.

SPEAKER_00 (34:08):
Yeah, because you know, I felt like everybody else
in the game was spending theentire day doing what I wanted
to do.
And and to me, it was four toseven.
Um sorry, it's a seven to ninein the morning, and then a five
to nine at night time is reallywhat I had, yeah, um, in terms
of the extra time that I had.

SPEAKER_01 (34:27):
Sure.
Yeah, and you know, that is soimpressive.
A lot of people just don'tunderstand what it takes to
actually get things done.
That's a lot of work, you know.
And so, and and sticking to yourday job, yeah, yeah, your W-2.
Yep.
And then so you once you did uhyou ended up buying your first
one.
Let's talk about that.
When did you actually quit yourW-2 job?

SPEAKER_00 (34:47):
So uh while I was doing the whole hotel and even
after W closed, I still had myW2 job.

SPEAKER_01 (34:52):
Yeah.

SPEAKER_00 (34:52):
So I just timing wise, 2023 is when I started
searching for my deal.

SPEAKER_01 (34:59):
Now, meanwhile, you still have your ADU cash flow.

SPEAKER_00 (35:01):
Oh, the ADU, yeah.
I did my ADU and my Airbnb.
So everything was kind of stilleverything was running in
parallel.

SPEAKER_01 (35:06):
Got it.

SPEAKER_00 (35:07):
Um, so 2023 I started searching, 2024, April I
closed.
Um, and 2025 this year, Februaryis when I left my job.

SPEAKER_01 (35:16):
Got it.

SPEAKER_00 (35:17):
So it was only recent that I left my W 2.
Um, it was W2 sort of became mycash cow, if you will.
But like it became less, less,less important in terms of my
attention spin, how I, you know,how much I care about the job
really.

SPEAKER_01 (35:33):
Well, your heart was over here, man.

SPEAKER_00 (35:34):
My heart was over there, but like, you know, I was
trying to milk it, if you will,as much as possible.
Um, but I knew towards the endof last year that sometime this
year I was gonna leave my job.

SPEAKER_01 (35:45):
Got it.
And no regrets?

SPEAKER_00 (35:47):
No regrets.
I love it.
I'm I'm I'm you know, 15 yearsof working.
I'm I'm probably making the mostleast amount of money, except
for made maybe when I was a CPAwhen I was made at$30,000.
Um, but I'm I'm having the mostfun.

SPEAKER_01 (35:58):
Yeah, well, you're it sounds like you're on the
right track.
So talk about the acquisition ofthat hotel.
What did you where is it at?
You know, I because you told me,but I want our audience to know
where is it at?
You know, how many keys, whatdid you have to do to get it to
where it's at today, and kind oftalk about a little bit of the
uh the economics of it.

SPEAKER_00 (36:14):
Yeah, so it's a uh 24-unit uh boutique hotel.
Um, and also we bought a duplex.

SPEAKER_01 (36:19):
Which is great, which a great number right out
the gate.

SPEAKER_00 (36:21):
Yeah, yeah, yeah.
It's perfect.
26 keys total 24 hotel and twodoor duplex.
So with 2026 keys.
Um, it's in uh Salvang, uhCalifornia, which is half an
hour from Santa Barbara.
It's really nice, charming,Danish um city.
If you know, you if you haven'tbeen there, you have to go
there.
It's like just like every time Igo there, I love the city more.

SPEAKER_01 (36:41):
You don't feel like you're in California, you don't
feel like you're in LA, youdon't feel in the base big city.

SPEAKER_00 (36:45):
Everyone's happy, it's very slow, it's a wine
country, you know, everyone'sjust like having fun, it's very
family-oriented.
Like, yeah, it's just like it'svery slow.
Like, I I love it.

SPEAKER_01 (36:54):
Um, yeah, I love it too.

SPEAKER_00 (36:56):
Yeah, no, it's it's a great area.
Um, so uh yeah, uh, you know,again 24 units.
Um, it was very, very under uhutilized in terms of the hotel.
So they it used to be run by a93-year-old.
Um, they no technology, noprocess, no uh OTA presence,
like none of that, right?
Like they had like PDN and stufflike that, but no one was really

(37:18):
watching it.
Um, and um you know, it wasn'treally maintained well.
There's you know, everything itthey had good bones, um, but it
didn't have a lot of um you knowwhat it could be.
Yeah, so we we saw it.
Yeah, we saw it.
Um, and then um, you know, Irecruited a couple other
partners that I met through thethe hotel investing group.
One of the one of the members,one of the partners, um, he has

(37:41):
eight, nine, maybe ten hotels.
So he was the kind of the mentorof this whole process um in
terms of you know the valuation,the value ed, and you know, any
strategy that we had, OTApresence and marketing, all of
that.
Um, so we we had him as uh youknow, I had him as one of the
partners.
Um and uh yeah, it's been abouta year or so that we've been

(38:02):
executing on the value edstrategy.
Next week, we should be donewith our renovation.
We we started renovation thisyear intentionally, not not last
year, because uh we wanted toyou know operate the the
property with some cash flowcoming in.
Um, and then we started theprocess of renovation during the
soul season.
Um, so next week there was alittle bit of hiccup with the
with the with the city in termsof permits and things like that.

(38:23):
But shocking, you know, justshocking.

SPEAKER_01 (38:25):
You think I I know exactly how that all goes, man.
I build all kinds of stuff.
Yeah, I hear you.

SPEAKER_00 (38:29):
Yeah, even with the buffer, there was still an
additional buffer that I shouldhave built in.

SPEAKER_01 (38:34):
Yeah, you're so you're telling me you had
problems with the governmententity?
Got it.

SPEAKER_00 (38:38):
In California, got it.

SPEAKER_01 (38:39):
In California, exactly.

SPEAKER_00 (38:40):
Yeah, yeah.
But uh, you know, I think umthat in itself was a was a
learning process for me, gettingthe permit, working with the
city.
Um, you know, now I have uhrefactor everything about the
property.
Uh we have a new uh managementcompany, uh, we hired a new GM.
Uh we're gonna have a newproduct.
Uh so I'm I'm I'm building, I'mputting the right process and

(39:01):
the people in place that's gonnayou know help really maximize
the potential of the theproperty.

SPEAKER_01 (39:06):
You know, that's a typical you know private equity
strategy.
Come in, see the deficiencies,implement strategy, get rid of
the old management, bring in newmanagement, bring in a new
energy, you know, renovate it,make it new, make it modern new
systems, cut costs when you needto, and and then market, build
awareness.
You know, that's private equityin a net show.
Yep.
So you do exactly what you did.

(39:27):
And the biggest thing peopledon't know is how to cut costs
using systems and AI and tech,and then how to uh obviously
build awareness.
Marketing's its own, you know,you know, monster.
Um, and then changing outmanagement.
Yes.
You have to get rid of oldmanagement because old ways
ain't working for today'smarket, you know.
So you have to really shift.
So good for you.
Yeah.

(39:47):
So what was your acquisition onthat one?

SPEAKER_00 (39:49):
Uh intrinsic numbers.

SPEAKER_01 (39:50):
Yeah, just what'd you buy it for?

SPEAKER_00 (39:51):
Uh we bought it for 5.9 million altogether.

SPEAKER_01 (39:54):
What do you think the value is equity-wise of it
now?

SPEAKER_00 (39:56):
You know, it's a little bit hard to tell because
that we were shut down for aperiod of time.
And and obviously the thecommercial real being a
commercial real estate, it'sit's more of an income approach.

SPEAKER_02 (40:05):
Yep.

SPEAKER_00 (40:05):
Um, so I think we're gonna really need to build uh
the 12 month of solidfinancials.
Of course.
But over the next year or so,um, I think it's gonna go up to
our target refinancing target iseight to nine million.
Perfect in 12 months?
In 12 months.

SPEAKER_01 (40:19):
Think about that type of you know, increase in
value in 12 months.
That's insane.
You know, by the way, yeah, uh aconservative CPA is an is uh is
stands, sounds about right rightnow.
So, okay, and then uh and thenhow much did you increase the
rents um from what they weregetting?
You know, and I say rents as tosay per night, you know, uh
stay, what they were getting towhere they are now.
What's the what's the delta onaverage?

SPEAKER_00 (40:40):
Yeah, so again, like we haven't got there yet, but uh
we should be able to raise ourADR, which is the average daily
rate, by somewhere around 60 to80 dollars.
So going from like 150 to 220,230 uh average.
Um, and then the occupancy was Ithink well, occupancy is uh
really, I think, is a driver forus.

(41:00):
It used to be a 45% occupancy.
Solving as a market has 75 to 80percent occupancy across the
board.
Yeah, so our deal thesis waslike it was simple.
We let's just do what everybodyelse is doing, let's just catch
up to the market.

SPEAKER_01 (41:14):
Yeah, yeah.
Sometimes just you know they sayuh if you are a builder, don't
overbuild, right?
Sometimes if you go too far, toobig, it people just you're not
gonna get the valuation youwant.

SPEAKER_02 (41:24):
Yeah.

SPEAKER_01 (41:25):
Um, unless you're in a niche market and you have a
lot of money to burn, right?
And you can ride and reallybuild awareness and create some
sort of uh environment peoplewant to go to or an experience.
But if you have something that'skind of down the middle of the
fairway in the same category asmost, and you're trying to just
get to that 70% occupancy, don'tgo too far, do exactly what I'm
gonna do.

SPEAKER_00 (41:43):
I don't need the property to go 90% plus
occupancy.
I I would love it if you can getthere, but if we can get to 70%,
um, everyone involved in thisproject will be happy.

SPEAKER_01 (41:52):
There you go.
And you know, that's the that'sthe best part, is because really
what you're doing is you'retracking the data, you're
eliminating the emotion andyou're looking at the data.
And if you can get to whateverybody else is doing, you're
making money.
So buy low, sell high.

SPEAKER_00 (42:03):
I'll tell you one funny story.
So I knew all about this datapoint because the solving
actually uh publishes like theall occupancy data, adr data
through the TOT reporting.

SPEAKER_01 (42:12):
Perfect.

SPEAKER_00 (42:12):
So that's that was objective data.
But what's skewed in the data isthat you don't have an
individual comp, um, you know,you you can't you don't know
what hotel is making how much.

SPEAKER_01 (42:22):
Just giving you an overall average.

SPEAKER_00 (42:24):
Yeah, just kind of overriver.
So like there could be uh aone-star hotel that's making
fifty dollars an ADR, andthere's a five-star hotel that's
making fifteen hundred dollarsADR, and it's just kind of
skews, right?

SPEAKER_01 (42:34):
Got it.
So that's hard.

SPEAKER_00 (42:35):
That is hard.
Um, the funny story is that whenour when we were looking at this
uh deal and the investmentopportunity, there was another
hotel right next to our hotel,which is literally maybe like 50
feet, maybe 100 feet away fromour hotel.

SPEAKER_01 (42:51):
Right there.

SPEAKER_00 (42:51):
I go there as part of the market due diligence.
I was visiting all the hotelsnearby, just trying to get any
information, right?
Like I asked the hotel frommanager, like, what's an ADR
look like?
What is their shoulder season?
What's their high season?
What's their low season?
What's your ad look like?
They probably didn't know.
Uh they someone wouldsurprisingly, a lot of people
actually did know that good.
Um, but the the one that wasright next to our property

(43:14):
specifically, she literally justgave me, like, show me their
their uh financials and likeliterally like show me their
financials.
And then what they were doingwas what we needed to do.

SPEAKER_01 (43:27):
Did you tell them you were a CPA?

SPEAKER_00 (43:29):
No, I was just telling them that I was doing a
market study uh in the hotelspace because we don't know
whether was we're gonna actuallybuy this or not.
Um and I wasn't lying, but atthe same time, we weren't all uh
under contract either.
Yeah, so I told them what I wasliterally doing doing, which was
uh doing the market study.
Go there, but you know, it's uhthe hotel of the the next next
hotel is uh 24 units, same, samesize, but half of the units are

(43:54):
renovated, half of the units arenot renovated, and they were
still doing the revenue that weneeded to do post-renovation.

SPEAKER_01 (44:01):
Wow.

SPEAKER_00 (44:01):
At the at the ADR and in occupancy.

SPEAKER_01 (44:03):
Sure.

SPEAKER_00 (44:04):
And that kind of gave me the confidence that we
actually have better space interms of we have more space than
this this potential competitoror the neighbor property, um,
and and post-renovation and youknow putting the right uh the
team and process in place.
We that that sort of kind ofgave me uh a conviction that
yeah, this project is going tobe successful.

SPEAKER_01 (44:22):
Love it, man.
So you got a hell of an increasein value, at least your
projections.
And it sounds like you've youknow, I don't think a lot of
people I want to touch on thisbecause it's important.
To do boots on the ground marketstudies is really where you're
gonna get the data because youcan go pay for a third-party
market study all you want.
Sometimes they're not gonna beable to pull that data.
It's gonna be a scrub of somesort of, you know, you know, um,
Google is really what it is.

(44:44):
All these different um sitesthat may have some data and
they're just scrubbing it andtrying to give you an overview,
right?
To do and door knock is a wholenother level of data.
And I think it's a testament tohow you're really trying to put
this together, mitigate risk,and really know what your
neighbors ultimately getting.
And I think that's huge that youmentioned that half of it was
renovated, the other halfwasn't.
And if you're still seeing thattype of occupancy rate, that's

(45:06):
huge because you now know nomatter what, even if you have a
little bit of a tired product,you're gonna do well.
Where a lot of developers,especially guys like me.
So, like let's say, for example,um, I'm building an apartment.
Depending on how big theapartments are, as far as how
many, how many units I have, uh,like the dollar amount and
location, of course.
But depending on the type ofproduct, for example, windows

(45:29):
I'm putting in there willdetermine on who my end buyer is
gonna be, believe it or not.
Sure.
Because if you have an in if I'mbuilding to sell and I'm not
looking at a long-term hold,whoever is gonna buy it
typically is gonna look at itfrom a long-term hold, and what
they're gonna kind of payattention to is renovation,
cleaning up, management,maintenance.
Yes.
If you can create, you know,space where you have less
maintenance, your return profilelooks more promising.

(45:52):
Yep.
And so that's something that alot of people don't really pay
attention to is how yeah.
So so if you have once you getinto the institutional play,
like let's say you had a 200 keyhotel, it you're gonna be
looking at it from thatperspective, going, hey, we're
gonna renovate this.
You're no, you guys are lookingat it from a long-term play.
Yes, you guys have this as long.
So what what was the terms onthat one?

SPEAKER_00 (46:12):
Um, what do I mean turns?

SPEAKER_01 (46:13):
The return profile for your investors.

SPEAKER_00 (46:15):
Uh so uh ours is going to be seven to ten year
old.
Um, and we bought it for 5.9.
We're hoping to refinance around7 to 8 million um and exit
around 11, 10 to 12 millionwould be our target.

SPEAKER_01 (46:28):
Now, did you when you acquired it, you did what
what kind of mortgage did you gowith?
Because you went you went afterdebt, correct?
Yes.
Okay, so did you end up gettinglike a regular bank debt?
Did you go with a private moneyloan?
What did you end up doing?

SPEAKER_00 (46:39):
Yeah, so that is where I think this what made
this project also kind ofinteresting.
So one, um, so we had twodifferent um assets, if you
will, with duplex and a hotel.

SPEAKER_01 (46:48):
Sure, you had commercial and residential.

SPEAKER_00 (46:50):
Yes, yes.
On the on the hotel side, uh, wegot about 30% uh seller
financed, um, at the 5% interestonly for the first two years and
six percent after three years.
So that was a killer deal.

SPEAKER_01 (47:02):
Killer.

SPEAKER_00 (47:03):
Um, and then get those rates?
Nope.

SPEAKER_01 (47:04):
That was a 30% seller carry.

SPEAKER_00 (47:06):
Yep.
And then the 50% uh we got uhbridge lending because we knew
yeah, we knew we were gonnarefinance out of it.

SPEAKER_01 (47:14):
Um and that's cool because that stands alone and
res it's residential, so youhave a lot more options.

SPEAKER_00 (47:19):
Yep, yeah.

SPEAKER_01 (47:19):
So renovate it, get the increase in value, refinance
just that portion of the asset.
Yep, you got the seller carryfor the other was it 24 units on
that one?
24 units and then two keys onthe resident.

SPEAKER_00 (47:28):
So on the on the residential side, um, so the
similar story 30% sellerfinance, but we actually took
over the seller's mortgage as aas a sub two.
Does the the the two mortgagesoriginally then?
So there's one mortgage okaythat we basically just took over
the payment of the mortgage onbehalf of the seller.
We assumed it.
We assumed it, yeah.

SPEAKER_01 (47:47):
How cool.

SPEAKER_00 (47:48):
Yeah.

SPEAKER_01 (47:48):
I'm actually working on a deal to try to assume a
nine million dollar mortgageright now in the city.
Oh, there you go.
Yeah.
So and not all the time can youdo that.
So you had to go to the bank,disclose what you're trying to
do, assume it, qualify.
Yep, and they took it rightover.
Yep.

SPEAKER_00 (47:59):
How cool is that?
Yeah, it's a four percent um,you know, 30 year arm.
It was a great is a great deal.

SPEAKER_01 (48:04):
And so he got a 1% delta, so he got a yield because
you said five percent, right?

SPEAKER_00 (48:08):
No, no, no.
We were just we just took itover.
So he's not even making moneyoff the mortgage.

SPEAKER_01 (48:12):
Oh, so it's the carry that got five percent.
Got it.
So that 30% carry, in essence,the down.

SPEAKER_00 (48:16):
Yeah, yeah, yeah.

SPEAKER_01 (48:17):
How cool is that, man?

SPEAKER_00 (48:18):
So that made the deal a lot more attractive.

SPEAKER_01 (48:20):
Yeah, oh, for sure, because you don't have a huge
debt piece that you have tocover.
And and then that almostguarantees it it does, it makes
the numbers pencil better forhis returns.
You know, so now he feels morecomfortable that you're gonna
get it because he not only doeshe already know the rents he's
got or the you know income heproduces now, yeah.
He's seen someone who's nottired, he's got the young back,
he's 93 years old, right?
You say he's 93 originally.

SPEAKER_02 (48:41):
Oh, yeah.

SPEAKER_01 (48:41):
There's a manager, and then and then you know, you
go in, renovate it, generatemore income.
He's got a guaranteed cash flow.

SPEAKER_02 (48:48):
Yep.

SPEAKER_01 (48:48):
Yeah, and he doesn't have to worry about the debt
piece or any of that stuff.
So he's probably making the sameamount of money on a 30% carry
as he was on managing anddealing with the headache of it.
Yeah, exactly.
Is that kind of where it like sonow it's a win-win for
everybody?

SPEAKER_00 (49:00):
It is a win-win for everyone.

SPEAKER_01 (49:01):
So that's the strategy.
Yep.
So when you go in to negotiate,it's like, hey, listen, boots,
you know, ear to the ground tothe owner.
They, and especially with thesmaller boutique stuff, I've
learned that there's um somesort of connection to it, you
know, especially if they ownedit for many years.
They you know, they've raisedtheir family with the income of
that, and they've had all theseexperiences, they've had it for
20 years or 30 or more,whatever.
He's 93 years old.

(49:22):
How long did he have that thingfor?

SPEAKER_00 (49:23):
I think he had it for like so actually, you know,
backtrack a little bit.
The manager of the hotel was themother of the owner.

SPEAKER_01 (49:30):
Oh, okay.
Wow, okay.

SPEAKER_00 (49:32):
Yeah, yeah, yeah.
But like, you know, he is 60, Ithink around 60 years old.
Um, but he's had it for like 10,15 years, if I'm not mistaken.
Okay.
Um, but he didn't like reallyput any anything into the
property, like kind of kind ofkept it as is.
Um, but uh, I think what thatreally does into the seller
carry and just having seller aspart of our the uh capital

(49:54):
stack, if you will, is that itjust aligns uh everyone's
interests together.
So like you know, when we do ourdue diligence, um, you know, it
wasn't going to be, you know, wedidn't necessarily have to worry
about seller lying to us oranything like that.
Because like now everyone'slooking at the same thing, and
every we we all we all want thesame thing, which is to be
successful out of this hotel.

SPEAKER_01 (50:12):
And that's so cool because you're really sitting
down, you're showing your cardsand you're saying, hey, this is
what we're doing, and if youbelieve in it, that's we need
you to carry 30%.
Yep.
And if they're gonna do that,and that's a lot of skin,
they're leaving in the game, youknow, they need to feel
comfortable.

SPEAKER_00 (50:24):
Especially for the first timer like me, who are
like getting into the game forthe first time, like having that
sort of assurance was very, veryhelpful.

SPEAKER_01 (50:30):
You know, and then really at the end of the day, he
can always help if somethingwere to come up.

SPEAKER_00 (50:33):
Yep.

SPEAKER_01 (50:34):
You know, if something's gonna get rough,
you're like, hey, you're sittingon the board, dude.
I need you to help me, you know.

SPEAKER_00 (50:39):
So that was like kind of a side uh benefit that
we were potentially hoping for,is that we knew that he had a
couple other hotels as so maybedown the line, if we can
continue to make the debtpayment to him, um, that he'll
be potentially selling hishotel, other hotels, or maybe
it'll become investor.
We you know, still keep in touchwith him, checking with him from
time to time.

SPEAKER_01 (50:56):
That's cool because you know, at the end of the day,
he probably has a relationshipwith the city.
Yep, right.
And so if you need someone tokind of sit at your board, he
can kind of help you with anytype of city movement and so
forth.
Yeah, that's when you have asmall town, which is very, very
small town.
I'm very comfortable in smalltowns.
I get that.
You know, I had to power throughmy way of showing that I'm
actually uh, you know, I'm partof the community.
It took me a little bit of timeto earn that trust with the

(51:18):
community here.

SPEAKER_00 (51:18):
Yeah, I think that's really key.
Like being part of thecommunity, like you're not just
like a big guy coming into ahotel, just throwing money at
it.
Like we part of our coremarketing strategy is to be uh
an a marketing pillar, is to bepart of the community, right?
So we're reaching out todifferent vendors and we're
looking at different partnershipopportunities.
We want our hotel to be blendedinto the CDL Solvang.

SPEAKER_01 (51:41):
Yeah, and you have to, you know, so again, the
small town, you have to.
If it's a big town, yeah, notnecessarily you have to play the
politics, but you you're not astied into the community.
When you have a small town,community is absolutely everyone
knows everyone.
Everybody knows everyone.
Yep, you know, and it's a goodold voice club in a those towns,
too.
So cool.
Well, all right.
Is there anything else that youwould like to talk about to
build awareness for our audienceof what you're doing?

SPEAKER_00 (52:02):
So I think the last thing moving forward is that um
now I have minus sight tobuilding my cash flow, which is
it was one of the big projectsthat I had this year, which is
to buy a small business.
Um, so you know, I've developedmy thesis around real estate.
So I wanted to do more hotels,more real estate.

(52:22):
Um, but I also wanted to buy abusiness that provides cash flow
and the services um that canfund different real estate
projects.
Um, so you know, I've beensearching for the last six,
nine, twelve months or so.
Um, I'm under contract for a uha windows and doors uh
distribution company.
So anybody needs doors andwindows, especially high-end uh

(52:42):
customized doors and windows,this dealer uh does it.
We haven't closed yet, um, butwe are at the final stretch of
being able to close.
Hopefully November, December-ishis our timeline.
Um, so you know, once we buythat business, I'm gonna go all
in, uh, learn about it.
I know nothing about windows anddoors is kind of the thematic
area, right?
But I'm gonna spend the firstlike three, six, nine months,

(53:03):
like really, really learn thebusiness, learn the different
product, talking to differentvendors, talking to different
customers, um, and then figureout figure it out from there.

SPEAKER_01 (53:11):
Now, that's a little bit more of a different
strategy.
So that's kind of keepingmanagement in place.

SPEAKER_00 (53:16):
Yes, correct?

SPEAKER_01 (53:16):
So you're gonna keep, you know, in essence, the
existing CEO as the CEO of thecase.

SPEAKER_00 (53:20):
No, the owner is actually uh moving away.

SPEAKER_01 (53:22):
Does he is there a management team that's gonna
take?

SPEAKER_00 (53:24):
So everybody else is staying in.
There you go.

SPEAKER_01 (53:26):
Yeah, okay.
So the ones that are actuallyhands-on.
Yeah, yeah, exactly.
So that's usually that's aprivate equity structure too.
You know, PE firm comes in,offers something, they have the
CEO and management team stays inplace for X amount of years.
They give them a little bit ofmoney up front.
There's so many differentstructures, but a little bit of
money up front, then hey, keepthat type of volume and cash
flow.
We're gonna do all back officetax strategy, we'll do all PO

(53:47):
orders, right?
We'll deal with all that.
Yep.
And then, you know, we'll do allthe marketing, try to build
awareness.
You guys continue to scale,we'll step you out and bring
somebody else in.

SPEAKER_00 (53:56):
Yep.
Yep.
Yep, exactly.
So five-year reason for me wouldbe you know, owning more hotels.
Uh, I want to do one or twohotel deals uh a year.
Um, and in the in the businessside, I want to continue to
expand uh construction materialdistribution side.
All right, um, so you know, itcould be flooring, it could be
windows and doors, it could beall kinds of different
construction materials.
It's key in California because alot of the trade businesses I

(54:18):
was looking at require specificlicenses.
And I I'm just not a blue collarperson.
Um, so we're gonna kind ofbypass that a little bit, still
stay in real estate.

SPEAKER_02 (54:27):
Sure.

SPEAKER_00 (54:27):
Um, but I want to just like learn more about like
I want to be in the renovationproject, it was such a cool
project.
I want to like, you know, I wantto be more boots underground,
learn about it, uh, be able toum, you know, show to whether
blue or the white collar andanyone in real estate, I want to
I want to show to them that I amnot just someone behind my desk
and just you know punchingnumbers.

SPEAKER_01 (54:46):
Well, you did it, you know, and now you've you've
you realize that's not the clothyou're really cut from.
You tend to step out and do yourown thing.
And I think that's great becausethat's a lot of people are
scared, you know, to step out oftheir comfort zone.
Once you get comfortable, youdon't really want to move out of
there.
You all you want to do is try tomake a little bit more money and
start building a differentpersonal life.
You know, I I'm the type ofperson as I've been doing this
for so long that if I don't havea something to hunt for, I don't

(55:07):
have purpose.
Yeah, you know, and and I havegoals to buy and do and develop,
but I'm realizing how much Ienjoy the hunt more than the
money.
The money will follow.
You do all the right homework.
So it's it's like a it's a highstake chess game.

SPEAKER_00 (55:21):
Yeah, you know, that's a good way to put it.

SPEAKER_01 (55:23):
And it's it's so much there's so much um power,
and you just feel so like it'sintoxicating when you're able to
make a deal work and then younegotiate it.
It's like a whole differenthigh, you know?
Yeah, and and that's what peopleI think really get addicted to.
And if you're someone who justenjoys the hunt, you're not
really chasing the money.
Yes, the lifestyle naturallycomes, and of course, you want

(55:43):
nice things, but you're alsolooking for stability and you
want to be able to give value toyour people that are involved
and believed in you.
And that's so cool.
And again, like you said, uh,you know, the way you set up the
structure of the hotel with thecarry and how it's a win-win for
everybody, for the most part,I've learned that every
investment, if it's good for thecommunity, it's good for

(56:03):
everybody, the seller, us, theinvestors, everything, if it's
good for everybody that'sinvolved, the likelihood of that
investment to do well goes upsignificantly.
And so that's really cool.
And I love the fact that youagain you took out got outside
your comfort zone.
So kudos to you, man.

SPEAKER_02 (56:17):
Appreciate it.

SPEAKER_01 (56:18):
So, how can my audience reach out to you,
especially when you're about toopen up the window?
Which is funny because when wewalk through Dover today, I was
like, Yep.
You saw all the stuff.
That was all custom windows,everything else.
So it's perfect.
It's right, and honestly, Ithink that's the way the world's
gonna go.
Um, a lot of spec home builders,as you know, I do financing for
ground-up construction, a lot ofspec builders, and those are all
customs, right?

(56:38):
So I would love for my audienceto reach out to you.
I have framers and I have allthe guys that have also been on
our podcast, they're gonnaprobably want listen to this.
They always are looking for goodresources.
So I'd love for you to just giveeverybody a little bit about you
know how to how to contact you.

SPEAKER_00 (56:52):
Yeah, so I'm not super uh active on Instagram,
but s.alex.kang is my handle.
Um, I am a little bit moreactive on LinkedIn.
Um Alex Kang.
Alex Kong, yes.
Okay, you got me.
Uh Alex Kong on LinkedIn.
Um, I'm I'm which is whereyou're more active.
I'm a little bit more active onLinkedIn.
Um, but you know, one way or theother, I'll definitely check

(57:12):
messages.
Yep.
Um, but you know, it's yes,windows and doors, please reach
out maybe within a month or twouh or so from now.
But if there's anything thatI've said during this podcast
that I can help with, maybesomeone who's thinking about
making changes, if there if Ican be a resource to to anyone
um in in any way, please justreach out.
Happy to help.

SPEAKER_01 (57:32):
Well, I love the fact that you moved out of
Airbnbs, you went out of ADUs,like you literally have done the
paradigm shift.
Like you've learned that youhave to make moves.
If you just sit still, a lot oftimes you're just gonna lose.
So if you're starting to see atrend down, it's time to make a
move.
Yep.
Right.
And so you did the right thing,you're not by not being bullish,
not being scared, just hey, Igotta go learn it.
Knowledge is power, data doesn'tlie.

(57:53):
Take the emotion out of it,sharpen your blade, go do it.

SPEAKER_02 (57:56):
Yep.

SPEAKER_01 (57:56):
I love it, man.
So thank you very much forjoining me today, man.
I really appreciate it.
For all of you, thank you guysall for watching and listening
and on to the next.

SPEAKER_00 (58:03):
All right.
Thanks for having me.