What are some ways to increase income on a commercial property? Joseph Woodbury, CEO of Neighbor, shares his knowledge.

Read this entire interview here: https://tinyurl.com/wewybvt5

What kind of fees do you charge and how does it benefit the property owner?

We only make money when our partners make money. We don't charge any upfront or recurring fee, free to use the service. Just like an Airbnb or other marketplace, will take whatever you decide to charge as a host and we'll charge the renter a service fee on top of that, and that's where our money comes from.

It is a sliding scale take rate based on the size of the dollar amount of the rental. For smaller rentals, if it's $30 a month, we're going to take a high percentage take rate on top, to make the money that you need to, versus we have some spaces that rent out for 1000s of dollars a month, we're going to take a very low percentage take rate on top of that. It varies by the amount. But again, very similar to what you'd see on Airbnb, where it kind of slides based on the amount of the reservation.

Have you scaled the operations to cater to your partners who are listing their spaces with you?

It's very much scaling the technology. The value of the platform is the value of the tools that we provide. Every year we're trying to think how can we make this more of a passive income experience for our hosts because that is one of our differentiating factors. If you think of other marketplaces, to make money on Uber, there's labor involved, you have to go drive around, or Instacart or DoorDash, and you have to work for the income that you earn. Even Airbnb tends to have a decent amount of management and turnover and customers. Oftentimes, management companies are hired, Neighbor, on the other hand, is the first platform where we can bring you a renter, and you're going to get a payment from that renter every month without doing much of anything, it's very passive income.

Further along in the business, we've gotten the bigger hosts and have started to use the platform to where today. We have hosts that may own a $30 billion real estate portfolio across the country, office or retail or multifamily and they're listing lots of space on our platform in 100 cities. The tools required to manage that amount of space are very different than the tools required to manage a driveway or a garage. And so, building more robust payment systems to work with any large enterprises, custom payment systems, or building tools, almost like SAS-type tools where you can see the layout of hundreds of spaces and assign renters to different spaces, we use this cool tool called a blueprint for large owners of the land...

Can you share an example of a REIT or a larger investor that has onboarded some properties with Neighbor and how did that go?

In the retail space, we work with a group called Federal Realty, one of the largest owners of retail space in the country both on the East Coast and the West Coast. We onboarded them, we work with them both the suites that struggled to rent then will rent those out for self-storage, and also the parking in a strip mall. There's always that parking in the back that nobody parks on, we've rolled out nationwide with them.

On the multifamily side, an example of one of the many multifamily groups we work with is Equity Residential, one of the largest owners in the country. In some properties, they have 20 different vacant parking stalls while in some properties, they have five, but at every property, they have and it's all income, and those properties get leased up very fast. If I look at properties that are onboarded, they get up to 75-80% occupancy quickly. And then, when you add on the interior self-storage opportunity...

How to find, analyze, and convert small boutique hotels? What are the systems and tools to use and the processes for hiring top people? Blake Dailey, a real estate investor, owner of boutique hotels, and founder of BoutiqueHotelCon, shares his knowledge

Read this entire interview here: https://tinyurl.com/yevhs2u3

How long did it take you to surpass your W2 income after you started investing?

It took 13 months from the time of purchase. Short-term rentals helped me achieve that goal more quickly.

How do you find a small boutique hotel? How do you analyze it, including conversions, if you undertake them?

Municipalities across the country are increasingly regulating short-term rentals in places like New York, Dallas, Atlanta, and Southern California. These regulations aim to protect the single-family housing market and the rental market. Hotels, classified as commercial properties, are designed for nightly rentals and thus aren't subjected to the same regulations. Authorities aren't shutting down major hotel chains like Marriott and Hilton due to the influence of hotel lobbyists. This lack of regulation provides an opportunity to invest in prime real estate in metropolitan areas or their suburbs.

To find these opportunities, I seek out tired hospitality assets typically owned by Mom-and-Pop operators who often reside on-site and handle all management tasks themselves. The inefficiencies of managing a business where you both live and work can be substantial. Many of these operators are slow to adopt technology, neglect online travel agencies (OTAs), and fail to engage in marketing efforts beyond word-of-mouth referrals or basic direct booking websites. By acquiring these properties, refreshing and renovating them, and listing them on OTAs such as Airbnb, booking.com, and Expedia hotels.com, we can attract a wider range of guests. We also focus on collecting guest emails and contact information to facilitate direct marketing efforts, which can significantly increase margins by avoiding OTA fees.

We target markets such as destination markets, ski towns, and beach towns. For instance, Panama City Beach attracts 17 million visitors annually. However, similar opportunities exist in various markets nationwide, including metropolitan areas. I've found success in acquiring outdated properties owned by owner-operators, improving their efficiency, updating their design, and consequently increasing their average daily rates (ADRs). Since commercial properties are valued based on net operating incomes, these improvements can significantly boost property values.

Can you discuss your systems, processes, and approaches to hiring and developing your team?

Investing in this asset class requires a team effort. I couldn't manage all my hotels alone, although I did gain experience managing all my short-term rentals while still involved in residential properties. I outsourced administrative tasks and guest communications to cope with increased demand. Boutique hotels generate revenue from the outset, enabling us to hire and outsource roles early on. For instance, with a property generating hundreds of thousands of dollars annually, we can afford a full property-level team, including a director of operations, operations manager, revenue manager, and guest relations team. Regarding guest check-in processes, we employ self-check-in systems for smaller properties, while larger properties with higher revenue may warrant on-site staff

Blake Dailey

www.instagram.com/blakejdailey

www.botiquehotelcon.com

What are the top lessons learned over a four-decade real estate investing career? What are his thoughts on the current real estate investing market compared to other difficult markets that he has been through in the past? Is there such a thing as work-life balance? We are chatting with Stephen Bittel, Chairman and founder of Terranova Corporation, he manages their sizeable portfolio of properties in several asset classes such as retail, multi-family and office.

Read this entire episode here: https://tinyurl.com/2s3u5u3y

What is like investing today compared to the past?

This is the hardest investment market we have ever participated in. There's staggering uncertainty about the future, with half of the pundits predicting a recession and others foreseeing a soft landing. People simply don't know what's coming, and this uncertainty freezes both debt and equity capital.

Part of the challenge today is that most of the people making investment decisions have only experienced an era of continually declining interest rates and cap rates, where you didn't have to be particularly skilled to make money. However, the current situation is different. While there was a brief interruption in the last quarter of 2008 and 2009, the past 15 years, and even longer for those under 50, have been relatively stable. Positive leverage, which used to be a hallmark of real estate investing, is now extremely difficult to achieve. In the past, we could finance properties at lower rates than their initial yield, resulting in immediate profitability. However, achieving such positive leverage today is nearly impossible. Despite this, we continue to invest in properties with tighter yields if we see opportunities to increase income.

What are some of the toughest lessons learned, and what advice would you give without someone having to experience it themselves?

Managing cash flow is crucial both corporately and at the property level. We've always prioritized managing our balance sheet, promptly paying down debt after liquidity events. The key lessons are:

1. Invest in projects with potential for revenue growth, especially in areas experiencing positive population growth.
2. Establish strong capital partnerships, as demonstrating the ability to close deals is vital. Seller financing can be advantageous for both parties.
3. Consider being a nonrecourse borrower to protect against personal liability in challenging times.
4. Honor loan covenants, and prioritize maintaining a clean balance sheet.

Regarding nonrecourse loans, although they may incur slightly higher costs, the benefits of a clean balance sheet outweigh the expense. While our model may not be replicable for everyone, I would advise paying the premium for nonrecourse loans if given the choice.

Commercial real estate is a fantastic industry with long-term wealth-building potential. While it's not without challenges, such as the current uncertainty in the market, it offers numerous advantages, including tax benefits and opportunities for cash-out financing. It's essential to treat real estate investment as a full-time commitment and to prioritize understanding the details of every transaction. Ultimately, success in this industry requires dedication, hard work, and a deep understanding of market dynamics.

Stephen Bittel

stephen@terranovacorp.com

www.terranovacorp.com

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