Episode 177 | Danny Frye | Military Millionaire

00:00 - 05:00

David:

What's up Military Millionaires! I'm your host David Pere. I'm here with Danny Frye today and Alex you will notice he is not here right now. He just closed on a house in Charlotte so he is currently like you uhauling or whatever you do to move his crap from one state to another. And I suppose that's a good excuse to you know, not actually making a recording while driving.

So that being said, Danny is a retired Army and is a friend slash I think, I guess business partner at this point of two guys that are both members of the mastermind but also just really solid dudes. So Octavio Mota, and Adith Shaw and I mean, as I was telling him before the recording started Adith saved my ass once the San Diego so I pretty much anytime his name comes up, I make sure make it a point to throw that out there because, well, you know, he's super inconvenienced himself and went like an hour and a half out of his way to help me when my car blew up the day I was supposed to be PCs are leaving California. So super cool gentleman. And so yeah, so I'm super excited to hang out with you, Danny and hear your story and talk real estate.

Intro:

Welcome to the Military Millionaire podcast where we teach service members, veterans and their families how to build wealth through personal finance, entrepreneurship and real estate investing.

I'm your host, David Pere. And together with my co host, Alex Felice, we're here to be your No BS Guides along the most important mission, you'll ever embark on your finances.

Sponsor:

Hey, guys, if you're looking to take your investing, business, life or just yourself to the next level, then I have something for you.

The War Room Real Estate Military Mastermind Group is a mastermind group that meets weekly in small groups of five to six people to help you hold yourself accountable and really experience that growth. But we also have a monthly guest speaker that we bring in. And we've had guest speakers that talk about mindfulness, taxes, or bringing in somebody to talk about marketing.

We bring in very specific topics that will adhere to very broad any kind of real estate investing, or investing or entrepreneurship that you want to do, and will really help you out. We let you ask these speakers questions and get very personal with them. And then back to the small groups, weekly accountability for what you're trying to achieve. And just being surrounded by like minded people, and they say your network is your net worth. I know that's an overused phrase. But I recommend that you check it out. So just shoot an email to [email protected]. Once again, that's w[email protected]. And we'll send you some more information.

Danny:

Yeah, perfect! Thanks, Dave, for having me on!

David:

Yeah, absolutely!

Why don't you want to give a little background to I guess, how you got into real estate? Or just how you came to be you and where we're at now?

Danny:

Yeah, that's a great question. I love it.

So yeah, I spent 20 years in the military. And, you know, the whole time, like a lot of people from my generation, going into the military was getting out of the military for 20 years.

David:

Yeah.

Danny:

And, you know, the Army has a way and the military has a way of forcing you into real estate investing. So you know, you buy a house and eight months later you gotta go somewhere, you can't sell it, because you can't afford to sell it, and yet start renting it out. After about five years before it came back to Fort Bragg that you can have, we lived in the house for maybe eight months, owned it for five years and had maybe one month of vacancy. And I came back and I'm like, wow, my house is worth 20,000 more than it was when I lived, you know, when I last lived in it. And you know, I owe you know, several $1,000 less than what I originally you know, what I originally paid for, and I thought man, this could be cool.

We got PCs to Texas in 2011 2012 to Fort Hood, my wife and I, and that's where we really got into real estate investing. I picked up a book from Dean Graziosi. I can't quite remember the name of the book. But it was something along the lines of invest in real estate now. It was something about taking action. And I've really loved the books are plugging into his program. And within a few months, we bought our second home, which was a four unit multiplex. In like the worst neighborhood. And the day we were moving in. I was able to move about half of the stuff and then that night I deployed to Afghanistan for a year.

David:

Oh my goodness.

Danny:

So just, you know, Army stuff, man, I have a rock star wife that was able to deal with me through all that.

05:00 - 10:00

David:

Hey babe, you want to househack? By the way, you're doing it on your own, have fun, see you.

Danny:

Yeah we had the rear detachment come in and help remove stuff into the house and get everything set up. Good unit and it was pretty funny. She still brings it up every night.

David:

Oh yeah, that's hilarious.

Danny:

And a lot of money on it.

David:

Yeah, well and it's hilarious on all sides too because you've got that story. But there is some Army vet running around who's like, yeah, man, I checked into my unit, and everyone else deployed and I got to help random people move their wives into their houses because they weren't there.

Carrying furniture that was my job. You know I was a frickin moving company.

Danny:

Oh, yeah, absolutely.

David:

Such a military thing. That's funny.
Danny:

Yeah, so I developed a passion for it, then, you know, we pretty much get off work, go to the house, spend an hour or so just doing research. I said, and I set a goal to underwrite five deals, you know, five houses, just random houses that I thought would be a cool investment. And just got into the habit of doing that every day, five houses every day? Not necessarily to say yes or no, but to look at it, and say, okay, what number, what would buy by number be for this to be a great deal? And, you know, what we've picked up from Dean, which is probably you that that tactic is probably ran its course, but you know, just submit a whole bunch of a whole boatload of offers, you know, as like, you know, if you submit 100 offers and one of them sticks, and you still win. And that's not a very good way to make friends with real estate agents.

David:

No, and you probably would get laughed at right now with anything on the market.

Danny:

Right now it’s terrible.

David:

Yeah. Like, oh, yeah, well, some knucklehead is gonna pay $20,000 more than it's worth. So, no, I'm not taking your lowball. Sorry.

Danny:

I'm not even gonna write it.

David:

Yeah, that's definitely, I mean, in a buyer's market, where houses are sitting on the market for extended periods of time, writing multiple offers is really not that. I mean, yeah, some of them were embarrassing, but like, you'll get acceptances. You're absolutely right. And I had an agent, and this works in some markets and doesn't work in others in Missouri, this works, I had an agent, we would just text or call and say, you know, hey, this is where we're gonna come in at, you know, your client better than we do is it worth submitting the offer or not? And we still locked one up even with that super, non committal like, Yo, rather than wasting your time worth reading this offer, we're just, is this gonna work? Maybe? Okay, then we'll submit it. And, you know, it's still work. So yeah, definitely a viable strategy in the right market.

Danny:

Yeah, we've had some success doing it that way. It's really up to the comfort zone, or the agent, I believe, because, you know, there's a lot of times where, that's typically how if I'm representing a buyer, I am a licensed real estate agent. I did that when I got out, I thought that was the next up. And then, I mean, it's such a simple thing, you know, you agree to the terms, it's in the text, right? It's in writing, you did, alright, and you just kind of negotiated there, it takes minutes versus, you know, an hour of paperwork, and then pass it back and forth. And so the agent I had in Texas was very rigid that way and said that, you know, it's kind of a lesson learned. If your agents are rigid, you probably need to find a different agent.

David:

Yep. You'll find someone flexible. Someone hungry.

Danny:

Yes, absolutely.

Somebody's willing to go get it.

But yeah, so after the military, I jumped right into real estate sales. I was fortunate or unfortunate enough, however, you want to look at it that I got 100% disability and a pension. And so my take home pay was $50 less a month and my active duty Sergeant first class pay.

And, yeah, I thought, Well, man, I can do whatever I want now, you know, I can work, you know, so every dime I made during real estate sales went right back into real estate sales, because the household was covered. And so, you know, once I put that in there, the risk of losing, you know, is not as important anymore, right? I mean, even you know, it allows you to take more aggressive decisions, I believe.

David:

Oh, yeah. Yeah. If you've got your, your baseline covered.

Yeah, that's one of the reasons I'm an advocate for the TSP because, you know, a lot of service members, they that, you know, mess that up or whatever. Luckily, it's set up a little bit better now, for it to actually go in the right fund and there's the match. So younger guys who come in with that are set up better than we were. But it's like, Hey, if you contribute to the TSP for the first few years, you're in the military, then that thing will just grow on its own, and you never have to do anything again. And now, you know, hey, when I'm 60, I'm covered. This thing is enough to maybe not be rich, but to live on to cover my basic expenses.

So now I can go big or go home, because I'm not gambling with my retirement, I'm just gambling with the interim. And, you know, if I'm working for myself, or working a W-2, whatever, you got to do something new, and you're 30, but you know, it's nice to know that your, your future secure, you know, and then you can, man servicemembers have such a great opportunity to take big risks at a young age, because it's like you guaranteed a job as long as you don't get a DUI or murder someone. Like, it's such a secure position to invest from, or in your case, right. 100% P and T with retirement pay, like, I'm good. I'm covered. Like, this is what I was living on for the last 20 years. So I can continue to live on that. And I can invest in everything else.

10:00 - 15:00

Danny:

Yeah, yeah. And it's been great. This kind of caveat on the TSP. So there may be a lot of people out there that think like I thought, you know, when I joined the military, my mom, she was a, she was a cop. She didn't know much about investing. But she made me sit down with the police department's financial advisor, and establish some mutual funds, get into some mutual funds, $25 a month, you know, whatever.

And so we set that up, then, you know, I just kind of placated that, and then completely forgot about it a few years later, I got into, I didn't do the TSP route, but I did do an IRA. 401k yeah, I guess it was an IRA that was set up as a Roth. But my mentality was, I didn't want to save money for 60-65, you know, 70, whatever that was. You know, I wanted to employ my money in a way that I could do better, I could do more stuff with it now. You know, I don't know if I'm gonna live to 65 to 70 right.

David:

Yeah, I feel you.

Danny:

So what I've learned, though, is there are retirement accounts out there that give you total self control over your retirement funds. And So had I been more aggressive, then I would have had access to it now to be able to invest the way I want to, within the retirement structure.

So retroactively that mindset of don't, you know, I don't want to put it into a retirement account, because I'm not really that concerned with my retirement, I'm concerned with making my money now, that is an actual tool, you know, especially when you get out you can transfer that and get complete access to it, you can do all of your own real estate investing through that platform. But it's a great place to stack bills, and get it ready to employ in a meaningful way.

David:

Yeah, and it's totally passive.

So, you know, and when you're, you know, an E-1 or E-2, you're probably not, you're not using the VA loans, you're not really the real estate's a little hard your first couple years in the military, although I know some guys who've done it, but a good opportunity to build up a good, you know, secure cash or emergency or 401k position.

Okay, so you're buying single families by making millions of offers.

Danny:

So ended up going back to Fort Bragg. You know, at this point, I had transferred from being a combat engineer into special operations. And it was very demanding on my time.

David:

You don’t want to do metal detectors anymore?

Say that again?

I said you don’t want to play with metal detectors and deployments?

Danny:

Oh, no.

Actually, I really was looking, you know, I wanted the big picture. I want to see things from a bigger picture. And that's why a job has more control over your future, but you have less time at home. That was the trade off.

And so the real estate investing stuff kind of took a pause the education didn't I stayed, you know, continuously read everything, I could listen to everything I could, I planned my retirement out five years in advance 10 years in advance, you know, just like hey, when I get out, I'm gonna be a real estate agent, then I'm gonna buy a bunch of houses. And then I'm gonna do it in this manner. And you know, I talked to people all the time about what I wanted to do. And I advise people all the time hey, you know, you should get into you need to buy a house right? You know, there's a lot of, you know, mixed feelings about that three, the financial Little security space about whether or not your primary residence is an asset versus a liability.

And for me, if you have nothing in the bank, you know, maybe a couple $1,000, use your loan, to buy that house, because in a few years, your net worth is going to exponentially increase over time, just because of the appreciation of the house, you know, the pay down of the debt. If you happen to move, somebody else is paying for that asset for you. And then you could do with, you know, you can do with it, whatever you want to later on. But it gives you that opportunity. And you only lose when you sell. So, you know if it's a bad time, you know, try to hold it.

15:00 - 20:00

David:

Yeah, yeah. Which that's why cash flow is so important. If the property's cash flowing, and you've got it rented. If the market dips, as long as you've got reserves, and you've got, you know, a cash flowing property. You're okay.

Danny:

Right, right.

So I jumped right into real estate, right, jumped right into it. And I started submitting, you know, I started using LinkedIn, a lot, LinkedIn, and Facebook, you know, and I just started telling my story, I am in, you know, getting out of the military and going through real estate school, you know, I got my license, they picked the firm, right? And all those people for years that I've been telling to buy a house started calling me because they wanted to sell our house, right.

You know, I had lots of friends of mine that were, you know, had left Fort Bragg 5-10 years ago and will never come back. And they're like, I should get rid of that. Sure, man, I'll take care of you. So my first year was just absolutely crazy. Did a lot of business. And, you know, Rookie of the year, not that I was tasting that or anything I just wanted to win. Yeah, it was great.

I found an opportunity to be selected as one of the top 100 people in real estate. There was a magazine Top 100 Magazine. I had built out my LinkedIn profile so well that they reached out to me to be recruited. It's more of just a marketing platform. They don't really rate you. You know, you're not really the top 100 people.

David:

Don’t give away the PR Secrets. Like I saw someone make a Tik Tok video the other day, that was like, You ever see those clips where it's like, the top three people who whatever or the top 10. And you're like, this random guy who doesn't do anything is up next to like Tony Robbins, yeah, well, random guy paid five grand and get that slot. So he could say, hey!!

Danny:

Exactly, exactly but that’s credibility to talk about, right.

So that's all part of building the personal brand. You know, once you build that personal brand, it doesn't matter what direction you take, you know, you just people know you, and they're gonna follow you and follow you into whatever you change it to.

And so the single family thing, it was super busy. And took a lot of time and energy. And it really wasn't, I really wasn't doing what I wanted to. I found myself representing 20 or 30 real estate investors that were about the same thing I was, you know, about 50 grand in the bank. And looking for a flip type house that can either buy or buy and hold or flip or whatever. And the inventories, kind of diminishing, right, and so I'm representing 20 or 30 people all looking for the same half that I'm looking for, you know, so I'd have to, you know, kind of massage that relationship, you know, that fiduciary relationship. And then I just kind of found myself in commercial real estate. I ran into a guy who was looking at buying a 12 unit, I started talking to the seller and asked her if she had anything coming up or off market. And she mentioned this, he had a $12 million, 256 unit class A complex, yeah and I'm like, Well, cool. Tell me what, you know, tell me about it, right. So I took it back to the guy who was looking at the 12 units, and I told him about it, and he's like, oh, yeah, we can totally do that. Great, great.

You know, now I need to go learn how to, you know, sell how to represent a buyer this buying, you know, so jumped right into CCIM class, the 101. And, you know, gave a really incredible perspective on analyzing commercial real estate. And in fact, we use the same tools in the same lessons that we've picked up from that class today.

That deal fell through, right and what it boiled down to is that the guy had a bunch of investors interested and excited about that deal. And the deal was great. And we packaged it up very well, we negotiated $3 million off of their initial ask, which was incredible. Never even hit the market, you know? And suddenly, it's like, you know, all of his investors are backing out. And I'm like, why is that? Because the deal was good. And so what we learned is that he never structured he didn't know about a syndication, he didn't know how to do a syndication, he wasn't doing the syndication, he knew people with money, he locked the deal up, that felt like that, that would take place, everything would just happen. And so that's not how it works. If you don't have something for somebody to sign right now. You don't have a deal.

20:00 - 25:00

David:

Yeah or a solid platform.

So looking back at it, if we just structured a private placement memorandum, you know, for a private offering. I think the deal would have gone through, the plan was solid, everything was solid, the numbers were incredible. The structure wasn't there. The reputation was there. I mean, everything. But that propelled me into alright, man, I want to be in that space, I want to be buying those. And yet the thinking that, hey, I've got 20 or 30 clients that have $50,000. You know, what, if we can pull them together, we can buy something really magical, right? So what is that because I don't want to operate anything, I don't want to operate. You know, I did all my hard work already. And you know, I'm not trying to sweep the floors or the toilets or answer phones from tenants or, you know, manage that kind of stuff. So we started looking for an opportunity that already had a manager, right, we looked for the operator first. And I think that's what made us unique. And, you know, part of this process, you know, you're learning through this process on what to do, where to go, we had a pretty good understanding of what a syndication is and how to market it and how to bring everything together. We didn't understand the legal, right, we knew we needed to get legal, we knew that it was going to cost us, you know, $20,000 to get our legal stuff, but we didn't know where to Okay, so I'm asking all these real estate attorneys in the Fayetteville area. None of them had ever heard of a syndication before. And you're like, well, people are doing it. I'm listening to people on the radio that are doing this, like, What do you mean, I can't find an attorney that can do this. So I went to the real estate guys. Secrets of a successful syndication seminar.

David:

They cruise every year, right?

Danny:

I want to get on that too.

David:

Yeah, I've been thinking about it.

Danny:

Yeah, it's really expensive, but it's very exclusive.

David:

Robert Kiyosaki, 2 years ago.

Danny:

Yeah 10 days out at sea with guys like Robert Kiyosaki, you know, and just a really close knit. I mean, I think they have like 1200 people on the boat, you know, 10 days, and they stop at Belize. And a couple other really cool places.

David:

Yeah. Super cool.

Danny:

Yeah, but their attorneys were great.

You know, they were the first guest speakers. And I'm like, All right, I got everything I needed from this weekend, on day one, and we actually engaged the attorneys premier Law Group, recently rolled. And they had such an incredible system. Just, you know, the cookie cutter system, that they knew how to do it every single time. They take all the nickel and dime feeling out of the equation, and you know, it's a flat rate, unless there's some extraneous things that, you know, some unique stuff that kind of falls outside of that.

But that really gave us you know, now we're like, Alright, hey, so how do we get to the next part? How do we, you know, we need to find an operator. Well, during that same weekend on LinkedIn, I met my operating partner, David Stoll. And David reached out to me, based on my LinkedIn profile, hey, look, I'm a hotel flipper. And I'm looking for an investor to come in and put down payment money down in the hospital for a hotel with 51-49. And tell me more man, you know, so we actually built the relationship over the course of about a year under, you know, he would send me deals and I'm talking like 10-15 a week, you know, he would love to jump on anything from, you know, a $1.5 million purchase price all the way up to, you know, 250 million, right.

25:00 - 30:00

Danny:

So after, you know, we put all that relationship together, we got to the point where we felt he was feted. I built a company around that model that a David is going to bring the franchise is going to bring, he's going to operate the day to day, he's going to negotiate the price, he's going to get the loan, all I have to do is go structure, some legal stuff, find a bunch of people, you know, it's got 20% of the money, and we can buy a hotel. And it sounds very simple. And it is very simple. It's not very complicated. Anybody can do it. But what I realized is not everybody can operate, you know, especially in the whole despite hotel space, you have to have experience to get that franchise experience, right. So it's really complicated to get there.

And so people ask me all the time, why did you go into hotels? Why not multifamily? Everybody goes to a multifamily, 95%, you know, go right into multifamily. I didn't want to be competitive, I didn't want to have to compete. You know, that's where that's where, you know, when you have to compete like that you lose profit. So I looked for opportunities that didn't have you know, we didn't have to compete. And David could do all the hard work. And, you know, we just built a, you know, built company around. And that's where we built Archimedes from.

David:

I like it, yeah.

And I guess we didn't really discuss any of this beforehand. But so I own a hotel. Just one. And it's not a franchise, it's in a really small town. So we've got some struggles, but there's three of us. So I found I was mailing for single families, this guy was like, well, I'll sell it to you. But I've got all this other stuff I'd like to let go of. So it's two small apartments and a 40 unit hotel with like, pool, hot tub, you know, whatever.

And we structured it to where one of the three of us gets a 7% management fee off the top, and he takes all the operations stuff. And that's been so nice, because I'd lose my mind if I had to manage that thing. If it's such a mess.

Danny:

Yeah, it's complicated.

Yeah and I mean, he has so much more nuanced stuff that you have to worry about with hospitality business, like, you know, you have an apartment complex, and your tenant hates you, and they move out, and nobody cares. But you have a hotel, and if someone has a bad experience, they leave you a one star review. And that is just no bueno. So it's an interesting gig.

Danny:

I mean, I always kind of correlate this to multifamily, because that's what most people know. And I did operate in that space a little bit. So I understand the space. And I understand the underwriting and numbers and everything and I understand, you know, the processes. But with hotels, the thing is, that, every month there's this, this report is put out called a Star Report. I can't recall what the acronym stands for. But basically, it tells you how your hotel performed, you know, what was the occupancy rate, you know, the revenue per available room, your average daily rate, what that was for the last 30 days? How is it compared to the last 12? You know, last year? What was your trailing three, and your trailing 12? And your date, but not only does it do that for your hotel? It does it for the entire comp set and the entire competition segment.

Yeah. So with that, with the comp set, you know, all the numbers on the comp center, right? So, you know, it gives us a clearer picture of what the capacity is, we're looking at a hotel, it doesn't necessarily have to be a foreclosure, it doesn't even necessarily have to be marketed as distressed. It's profitable, it's marked, you know, it's marketed as profitable. This is the price that it's valued at, based on the income that it received. But when you look at that report, you realize, you know, you can see that it's, maybe its occupancy was the same or better, but its average daily rate was less, right. So that's where you rely on your opportunity is. So then you get to ask yourself a couple questions. Why is that? Right? Is it because of the condition because that costs money, right? Capital expense, but if it's management that costs almost no money, then it's something easy to fix, you know, really easy to fix. You know, David's been doing it for 30 years. And so it's just amazing how complacency and poor management get, you know, factor In into the hospitality space, and it's like that with, you know, any kind of commercial real estate, right? Its values are based on profit, you know, we're off of income. So if the income is low, you know, you're getting a good deal, you're getting the deal. And a lot of times, that puts them at a negative in the, that puts them at a disadvantage in the negotiation, because they know it's underperforming, right, and they look at it as this big hurdle that's going to have to, to the people are going to have to come over and a lot of people look at it as massive hurdle.

30 to 45 days, and that's, you know, it's in revenue management 30 to 45 days, and we fix revenue.

30:00 - 35:00

David:

That's a quick turn.

Especially when you can just pause that and highlight how fast that is. If you're doing multifamily. The only two ways you raise rent are one renovation, which you mentioned in the hotel, it's distressed, right, that's expensive. So that could be either one. But the other is when someone moves out with an apartment complex, you can have your thumb up your butt, wait nine months for somebody's least to come up. And then finally, you can bring it up to market rent, even if you don't have to update it. Whereas with a hotel, most of those people are gonna be gone by the end of the week. So Tada.

Danny:

Right, right, exactly.

And the really interesting thing about it is, when you're assessing your capital expenses, right, for multifamily, or any other commercial asset for that matter. You're doing the assessment, right? It's you doing that assessment saying, hey, these items need to be fixed, right, and you're taking on the ownership and the responsibility of the capital improvement, for an impact that you want, right, that you desire, maybe it works out the way you want to maybe it doesn't, maybe you go over budget, maybe you don't but hotels, especially if it's a franchise, they issue out a report, they go in and do this massive inspection, and then issue a report called a property improvement plan. And if you want their hotel, you have to agree to that plan. And it tells you everything that needs to be improved. And the timeline is not necessarily real short. And so you're able to negotiate the timeline on certain items. So it takes all the guesswork out.

You know, David just hands that to, you know, his improvement guys, they go source it, and say, Hey, this is how much it's gonna cost. And, you know, we throw that into the race.

David:

That's awesome.

Danny:

It makes it really simple.

David:

What's your buying criteria? Like, what's your class of hotel are you guys operating in?

Danny:

Sure! So great question.

The opportunity that is out there is so vast, virtually unlimited in the hotel space. There's this incredible report, and I'm gonna get to your answer. There's this incredible report put out by hotelmanagement.net in August of 2020. And basically what it said is it took a look at the impact of COVID in the hospitality space, right. And so that impacts to COVID. They assess that 80% of all hotel mortgages were in jeopardy at default, with an expectation that 50% of all hotel mortgages would go into foreclosure proceedings in the coming year, right. And a lot of that is what occurred. So just because you see a hotel that's open and operating doesn't necessarily mean it's not bank owned, or franchiser.

David:

Yeah, we got a couple at least one that I know of that went down and got demoted to build something else here in town.

Danny:

Exactly.

You know, we're starting to see an interesting tactic where, you know, multifamily people are shifting into the hospitality space and doing conversions into and there's a lot of really great benefit to that just depends on, you know, there's a niche for but so we would get these, you know, David has the capability of managing all the way up to, you know, five star resorts with all the bells and whistles, all the way down to you know, bed and breakfast.

So, he has that range. And with an experience with every franchise, there's really no limit to what we can do and what we can take. Really the limit right now is us you know, it's how much capital are we able to raise? What is the size of our network? And what portion of our network is investing with us? I'd say right now our sweet spot is within that, you know, somewhere between like 1 and $3 million raised with, typically between for accredited investors, it's typically between 50,000 and 100,000 for minimum commitment.

35:00 - 40:00

David:

Yeah. So that puts you at what, 5 to 15 ish for purchase power?

Danny:

Yeah, about that.

We're picking one up for 4.4. But the exit is going to be about 9.5. And then we picked one for three. So we're getting a lot in that sweet spot around that three to five range. And there, you know, so typically, that's limited service, your economy class kind of hotel. But there's a lot of great opportunities out there that we're really trying to shift into. It's in the select service, especially around Branson, Missouri. Oh my god, Branson was just eviscerated during COVID.

David:

Really?

Danny:

Yeah.

David:

I'm in Springfield, about 45 minutes north.

Danny:

Oh man, like every hotel and branch is in here right now.

David:

Oh, I'm sure yeah. Old people, Vegas.

Danny:

That's the Midwest Riviera.

David:

Yeah.

Oh, that's funny.

Yeah. Branson's an interesting beast. But yeah, that's cool. Yeah. Anyway, I didn't mean to derail you there.

Danny:

Yeah. Great.

I mean, there's just so much out there. And the thing is, there's not a lot of competition. So if you go off the rule, the supply and demand, right, multifamily has very limited supply, and a ton of demand, massive ton of demand. And so it makes it really competitive in that space to get and that's why you see that cap rate compression, right?

In the hotel space, they don't necessarily go off at a cap rate, they go off in gross revenue multiples. And so you will see, you gotta identify who you are competing with? Right, then, you know, all the all the you see all the assets, all the supply? Who's the competition? Right? And so who buys hotels, right? So it's institutional investing, like, you know, publicly traded REITs, you know, that's your big, that's your big money. They don't, they don't buy value add, right, they buy stable corporate core plus what they call it, you know, stable assets. And, you know, because they want a stable return for their investors with moderate growth.

So that's the end user, right on what we're doing. Then you have, you know, some multifamily people that are coming in and doing conversions, well, it only really makes sense for them to do that with a severely distressed asset or something that is lost its flag or something like that, because it costs too much money to divest it, and then reimagine it. And so it's the opportunity there is in like these abandoned hotels and in these towns that need housing, right? And so governments incentivize them. So there's like, great opportunity there. But they're not, they're not a competitor to us, because that's not what we're buying.

And then, you know, franchises want you to have franchise experience, to be able to sell you a franchise and the banks want that too, to be able to assume the risk. And then a lot of those people that had been competitive, just got their teeth kicked in the last two years from the impact of COVID. So they're not competing. So it really, you know, we I mean, we can pull we have so much, you know, we can do so much and if the opportunity right now is so good, best time in generation to get in the hospitality, but it's so good in hospitality, that we start when we structure we take 49% of a hotel, right? Raise the downpayment money and that's the investment. And then from that 49% we won't even send it to our face to underwrite if there is a 20% or better internal rate of return for you know, for the limited partners for the investors. So even after all of that, you know, cutting out you know, 49% taking RGP stake and doing all the you know, whatever fees at to be affiliated with it. We still have 20%. Find it all day long.

40:00 - 45:00

David:

That's yeah, that's pretty impressive. That's cool.

Crusher to you as a guy who owns a Podunk Hotel. So the super short story about ours is the guy bought it. So it went, it went under three years ago, not because of COVID. But because, well, we'll put it this way, when we took over somebody called the front desk one day and asked if they could still get a free night stay in exchange for a hit of heroin. So it was not managed very well. So I went under bank took over banks over to this guy named Tom. Tom tried to do a conversion to assisted living or something like that. And the city is very small, the town is like 3000. And the town was like, Nope, that's the only hotel lb rocks like, do whatever. And so it is the only hotel and like, 15-20 miles, so it's the mom and pop it you know, it does its thing, but it's not anything crazy. But I'm curious. I've never even thought about it. You've mentioned it a few times now: the flag or the franchising or so what is the park there? Like? Is that an opportunity that I'm missing by us just running the show yourself? Or is that more beneficial for like, a big hotel as far as getting all the resources and stuff for?

Danny:

Yeah, I mean, it's really case by case. I would say probably 32 rooms is probably about the smallest you want to put a flag on. Because you do have a, you do have a franchise expense. And then you pay them a percentage, you know, it's usually somewhere around a give or take, depending on the franchise, a percentage of sales room sales. So any tertiary sales, don't give to them just for himself.

But what they provide is, you know, access to the mass marketing, right, you know, their entire mass marketing, and it brings some credibility, right. So, I would ask the question. Are you getting the goals that you want, you know, out Andressa because it's going to cost you some money, and if not, you know, if it's really appealing, the franchises will offer incentives, we actually have an independent right now that we're putting a flag on, it's gonna be a carry on point. But it's very similar to what you're telling me. We just have 98 rooms, you know, but it's a very similar kind of town, right? There's this the only hotel in town and it stays at 46%, right, and there's really nothing there. So you know, the value add, you know, we increase the brand, increase the revenue 37%, what clear on tells us just by changing the brand over. So, if you're calling some of these franchises to ask that they're going to do an analysis on your behalf, right, and they're gonna tell you if they're interested in it or not. If they're interested in that, then it's probably beneficial.

David:

That makes sense. I hadn't even thought about it that way. I'm gonna go and go and google up some franchises.

Danny:

Yeah, I mean, I can connect you with David. David knows all these people.

David:

That'd be awesome. Yeah. I'd love to hear that.

And I'd definitely love to hear what you guys are doing in Branson at some point because that's a you know, my bad my backyard.

Danny:

I want the Radisson.

David:

Yeah, man, Branson is weird, it's a weird beast, but it is. The short term rental game there, especially down by the lake, is just killer. You know, because the prices are still very reasonable in Missouri. I mean, you're seeing it if you're buying anything in the Missouri area, like I can still go buy a house for under $100,000 if I want to, it won't be a really nice house. But, you know, Missouri pricing is very reasonable. But then you get into Branson pricings a little bit more pricey. It's still reasonable, but Branson is such a hoppin travel place that you know, there's a ton of tourism, a ton of business. The one thing about Branson is, boy, does it have a reputation for sheisty business doings, like they, I swear, like, you want to look up real estate lawsuits in the city or the state of Missouri and Branson is probably that spot. And my attorneys always joke about it like that, you know, but it's what it is. And that's super cool.

45:00 - 50:34

Danny:

I love it. I love it, you know, and all this stuff. We were just looking, right it's not like we knew exactly what we're doing. We were just open to it, looking and thinking big. And it all literally just kind of feels like it just fell in our lap.

So I talked about Archimedes earlier, basically created a new company Tempus 22 with Octavio and Octavio Mota and Adit Shah. Because it was a veteran, you know, all veterans owned and operated disabled veterans owned and operated. And so we looked at it as something that we can grow really fast. It was a bunch of big thinking, partners, highly motivated. And everybody understands that, you know, there's a thing called failure out there, right. And you know, that's what you get with veterans, right?

David:

Yes.

Danny:

You always have to achieve.

Yeah, so we didn't close our communities. But you know, we have positioned ourselves in the building Tempus 22. And so Tempus is a storm, right? Like this hurricane, right? It's very disruptive. So we kind of took that disruptive. You know, we wanted to be disruptive in the private equity space, not necessarily just syndications, but private equity in general. And then 22, in remembrance of the 22 veteran suicides that occur every day, it's bring awareness to that. And our intentions are to donate a significant portion of all of our profits into veteran organizations like that.

David:

That's super cool.

And you know, and I love, you know, all the guys in the group. So that's awesome. And what you're saying about, you know, at 49% occupancy with all your everything else, you're able to return 20% IRR, like, that's, that's pretty sweet.

Danny:

It's pretty impressive. I really enjoy it.

David:

And the real kicker question, I suppose, is, you're running them at 49%. What do you think your average like actual occupancy is? I mean, obviously, that varies a ton.

Danny:

It does, but typically between 40 and 60%, in hospitality, right, your averaged occupancy over the course of the year is between 40 and 60%. That 60%, that's where you really start increasing the price of the room.

David:

Oh, that makes it I didn't even think about it that way. Yeah, that makes sense.

Danny:

You know, revenue management. That's why you see so many that are, you know, that there's such a value, even pre COVID, we were finding deals, you know, we were searching for deals just like that, that were positive in markets that we liked, and that had at least 30% growth potential. And they were everywhere, you can still find them everywhere. So it's not going to go away. The opportunity is not going to go away or just, you know, kind of shrink a little bit just right now it's you throw a rock and hit.

David:

That's funny.

Yeah, I hadn't. I mean, it makes perfect sense that this is the time. And it's been good for us for the most part. So that's awesome.

Wait, I know, you know, I don't want to be disrespectful of your time. And I also, unfortunately, have an hour-long drive to go to a city council meeting here in about an hour or 45 minutes. So before we roll, though, and this is awesome, because I, just you know, I think you're the first person I've ever had on the show who does hotels, which is cool to offer a different perspective on everything. You know, but how do people reach out if they'd like more information?

Danny:

Sure, absolutely.

I am all over LinkedIn. I'm on it every single day. So you can find me DannyFrye@LinkedIn. Our company has a Tempus 22 also has a company page, and our website goes live today Tempus22.com.

David:

Oh, right on. We already LinkedIn connections. Look at that.

Danny:

Perfect!

David:

Probably just because I have well, we have 200 for mutual connection. So it sounds like we both kind of do the same thing on LinkedIn, which is awesome.

Yeah, that's phenomenal. And you know, I look forward to hearing more about what you guys are doing which was successes and yeah, I definitely love a connection to David to talk flagship stuff but also keep me in the loop whenever you guys are dabbling in the brand scenario if there's anything I can do to help or you know, I got I got feelers here. I'm right down the road. So happy to help and happy to chat.

Danny:

Yeah, perfect. Appreciate that. Next time I get out to that area, or you get out to the Fort Bragg area, man, we'll have to buy ketchup and beer.

David:

Yeah, absolutely.

Adit is going to be here in two weeks. He's coming out we're doing a local event and for some people in the mastermind group and he's coming.

Danny:

Oh, that's awesome.

David:

Yeah, it'd be good.

Awesome, man. Well, hey, thank you very much for joining me today!

Danny:

All right, appreciate you David. Thanks for having me on.

David:

Absolutely. Anytime.

End:

Thank you for listening to another episode about my journey From Military to Millionaire. If you liked it, be sure to visit frommilitarytomillionaire.com/podcast to subscribe to future podcasts. While you're there, we'd love for you to rate the show. Give us a review on iTunes. Now get out there and take action.