Navigating New Horizons: Mike Stohler’s Journey from Multifamily to Hotel Investments

Following several delays, CEO Sharad Mehta and Mike Stohler eventually spoke on a recent REsimpli Podcast episode, thereby turning the emphasis from talks about conventional real estate to Stohler’s many hotel holdings. From Scottsdale, Arizona, Mike Stohler started his career in the Navy then moved to become an airline pilot. Inspired by Rich Dad Poor Dad, he launched his real estate business focusing on single-family and multipurpose structures. At first difficult, Stohler’s tenacity paid off.

Stohler started looking into hotel assets when the market changed and cap rates for multifamily buildings dropped. Under his own funds and direction, Stohler negotiated this new business under a seasoned hotel operator. This intentional conduct resulted in his successful metamorphosis. Early Stohler’s real estate activities especially with his initial rental buildings incurred some notable losses. Through innovative funding and working with property management experts, he turned these obstacles into teaching opportunities. Most significant also for his development was networking.

Hotel investment requires more appropriate attention than that of other buildings. Stohler would pay $2 million, get a loan of $4.5 million, and save $200,000 for contingency requirements for a $6.5 million hotel. With loan payments of $410,000 and a projected net operating income (NOI) of $656,000, the first year cash flow comes out at $250,000. Stohler’s method is based on closely examining operating expenses and vendor agreements, therefore improving hotel efficiency. To maximize occupancy and revenue, he keeps changing prices depending on franchise marketing strategies. Hotel cash transactions, according to Stohler, might provide advantages greater than ten percent.

Working for a foreign syndicate in Spain, Stohler is turning an old castle into a luxury hotel and haven. He also dreams of building a great Arizona hotel. Apart from business, he likes to travel, play music, golf, mountain time. Inspired by works like Rich Dad Poor Dad and Money Secrets of the Rich, Stohler stresses the value of smart money and personal development.

Starting their journey either as a limited partner or by observing seasoned operators, is what Stohler advises potential hotel investors. His real estate career highlights the value of flexibility, lifelong learning, and creative team building.

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Transcript:

Mike Stohler  0:11  
Hey, how you doing

Sharad Mehta  0:12  
good? Mike,

Mike Stohler  0:13  
how are you doing great. Yeah, we finally, we finally hook up. I think I had to cancel three or four times. You guys had to cancel three or four times.

Sharad Mehta  0:23  
There’s always something going on, right?

Mike Stohler  0:24  
There’s always, always life that happens.

Sharad Mehta  0:28  
Yeah? No, I’m glad that we’re finally able to connect. Cool. Do you have any questions, Mike, about the podcast?

Mike Stohler  0:35  
No, not at all

Sharad Mehta  0:37  
cool.

Mike Stohler  0:38  
Yeah, I know you guys usually don’t do the the hotel aspect of real estate, but

Sharad Mehta  0:45  
no, we’ll talk about whatever you’re doing. So, yeah, don’t feel I mean, feel free to just talk about whatever you’re doing in your business. Yeah. I mean, if nothing else, like, I’m always curious. Yeah, you don’t necessarily have to

Mike Stohler  1:00  
who are your listeners,

Sharad Mehta  1:03  
mostly, mostly investors that are wholesaling residential properties, but we also have invested that are doing, like multifamily stuff. Also, yeah, so totally cool to talk about hotels.

Mike Stohler  1:16  
Yeah? Because I what happens usually when I come on these podcasts, is I had, I’ve owned and managed over 1500 multifamily doors, okay, a lot of single family homes. So usually people are just interested why hotels or how they get in hotels. People really don’t think about hotels.

Sharad Mehta  1:38  
No, I’m definitely curious about that. So, yeah, I would love to talk to you about that. Sure. All right, cool. Do you have any other questions? Or we can? No, I don’t have any preset questions. So I’d really go based on kind of you know what you’re doing right now. So sure, yeah, people talk about hotels. Yeah, that’s yeah. You’re the first investor on the podcast that we have doing hotel, just to make sure. Mike Stohler, am I saying that? Perfect, perfect, perfect. All right, cool, awesome. All right, we can get started. 123, hey guys. This is Sharad with resimpli, host after resimpli podcast today we have a very special guest, Mike Stohler, on this podcast. He’s doing something very interesting, the first investor that we have on the podcast that’s doing the kind of investing he’s doing. So I’m very excited to jump into it. Mike, welcome to the show. How are you?

Mike Stohler  2:35  
Thank you doing great. Thanks for having me on.

Sharad Mehta  2:37  
Yeah, absolutely. Mike, before we get started, just tell us a little bit about yourself. Where do you live, you know, what kind of investing do you do, and how long you’ve been investing for? Yeah,

Mike Stohler  2:49  
I live in the steamy Arizona. I’m in Scottsdale. I think it’s only going to be, I think 110 today,

Sharad Mehta  2:57  
it’s going

Mike Stohler  3:00  
to get hotter. I get hotter. I started out prior service Navy. I was an airline pilot for many years. Thank you for and thank you. And, you know, a long time ago, I just, like everyone did the red Rich Dad, Poor Dad. And I was like, you know, kind of got hooked. That’s, that’s probably 90% of us bought my first rental. You know, I had eight homes immediately and failed miserably because I got started PG, called pre Google days. Oh, yeah, I couldn’t google how to be a landlord. No clue what’s a five day notice, what? What’s lease? You know, I didn’t know anything. I knew how to buy, and I knew how to wholesale, but I didn’t know how to how to do landlords. So failed miserably, took a break, became an airline pilot, got back, hot and heavy, just my my extra cash, started buying, you know, then it went from four plexes. You know, as an eight Plex, 20 Plex is 50 plexes, hundreds. Just kept going and going and going, going, going. And then I was doing it with my own money. And then I got hooked up with a mentor. And, ladies and gentlemen, just the mentors, the business mentors, everything is so important, you know, to learn, learn, learn. He taught me how to use other people’s money. I had no concept. I thought, you know, you buy a 50 unit, fix it up. Wait two or three years, do a 1031 and I was like, Wow, I’m gonna be 80 before I make any really good money. Don’t myself. So he taught me how to do my own and then I had a portfolio and some 1031 group out of either Iowa or Idaho came in and said, Hey, I want to buy these. And I’m like, not for sale, because now I’m finally having a I can golf every day. I can do what I want. You know, I was making pretty good living. I said, Man, I’m comfortable. They kept coming back, coming kept coming back. And finally I was like, oh, man, I I’m an IT. If I don’t take this money, because, you know, you’re making seven figure. I made 850,000 on one complex that I had for 10 months. Wow, netted. And I’m like, Oh, these guys are just crazy. But then I got to thinking, why are they doing this? And I looked at the cap rates and the compression, and here in the southwest, things were getting that three and a half four cap on multi multifamily. And I’m like, going, man, what do I do now? I have this huge chunk of money I didn’t want. I’m used, I was used to buying it eight caps, nine caps, you know? And that’s how I got started in hotels. So I transitioned my 1031 and how I got started in the hotel business. I found a guy, it’s all about networking. I found a guy that had about 25 years experience in hotels, and I told him, I said, Look, we’re going to use my money. We’re going to you’re going to find me Hotel. You’re going to run the hotel. I have no idea. You’re going to teach me everything, and I’ll give you a cut on the back end for helping me. And he was like, Sure, I’m just what I do anyway. So you’re telling me that you’re going to buy the hotel and I get a cut? I said, Yeah, you know it’s, it’s all about performance based. And we still have that hotel, and it’s doing fantastic, but that’s how I got from one house to lot of apartment complexes, hotels. Now we’re having to make

Sharad Mehta  6:27  
it sound so easy, yeah, I bought a house, then I bought four unit, then I bought it 20 unit, then I bought a hotel. Yeah, I

Mike Stohler  6:35  
had hair. I used to have hair when I started in real estate. Ladies Gentlemen, it’s not easy. This is not an HGTV episode. I know you don’t get it done in an hour.

Sharad Mehta  6:46  
You seem like the kind of person. I’m just going to take action. Yeah? Figure it out. It’s better to take action than kind of be 100% prepared, and then you miss the opportunity. So I love that.

Mike Stohler  6:57  
Yeah, absolutely. Let me Can’t you can’t do the analysis paralysis, you know? Oh, one more, one more seminar. Then I’ll be ready. It’s like, at some point, come on,

Sharad Mehta  7:08  
yeah, just no one. So what market were you buying these properties in? And what was the time period for these

Mike Stohler  7:16  
the hotels are the single family or the multifamily, the single family and Midwest, and then we transitioned out here to Arizona, and then I really made the big bump during the last recession, and that’s when I started getting into the bigger ones. Because in the commercial space, you have five year loans, you know, they mature in five years, or they reset. And, you know, I had some cash. I’d sold some stuff. And so what happened is, all these loans were coming due. They were valued at 40% of what, you know, these are 100% occupied performing notes, you know, apartment complexes. But they wouldn’t refinance them. You know, the banks were actually saying, we’re not financing anything right now. And it came up, and they said, Well, now it’s worth 1 million instead of what you owe, which is 1.8 you have to come up with the difference. And so there’s all these, that’s right, that’s how. And then I was like, Oh, I can come up with the difference. And sometimes I did seller financing. I did look, you know, I’ll, I’ll help you not go bankrupt and get foreclosure. So I did some outside of the box type financing to really buy and leverage. A lot. I really want

Sharad Mehta  8:29  
to talk to you about the hotel investing, but before we get into it, would you know this is, like you said, pre Google, that we got started, which is really, really amazing to like, just you casually saying, Oh yeah, I was bought eight houses. Then I kind of lost money on it, then I started again and bought 420, 50 unit apartment complex. So how did you how did you gain the confidence and the knowledge to go about this? Were you part of some investor group in your area. Were you part of another mastermind, not real estate related? Were you working with the coach? Like, how did you, you know, I mean, it’s not an

Mike Stohler  9:08  
easy Well, there’s, there was small town Indiana, there’s, there’s no coach, yeah, you know, there’s no winner. There’s, there’s no googling how to do this. And that, I just knew I saw these big, fancy homes on the lake. And I knew a couple of them. They’re like, going, why is it? There’s this real estate thing, right? You know, I knew from the books that I read. I went to ladies and gentlemen, went to the library, checked out books. That’s what we did back then. And I read. And I was like, you know, I know I failed, and we failed so hard that, I mean, we had to actually move into my wife’s parents house. So, wow, I’m one of those guys that’s not the these YouTube sensations. I made seven figures in 30 days, and you can too. Look, if you don’t do it right, and you don’t have the mentors, you don’t have the coaching, it’s easy to. I You just go out and buy it. But what do you do after that? You know? So we have failed. But I knew in the back of my mind, oh, well, what I did for a short period of time is I went, I was like, How can I gain the knowledge? So I actually went to work for a property management group, okay, well, stole their their forms, learned how they did it. You know, here’s the application, here’s the

Sharad Mehta  10:21  
amazing you were getting paid to be educated. Yes.

Mike Stohler  10:25  
So that’s what I was like. How can I do it? You know, I need to learn. I learned how to fail. How can I learn how to do it correctly without the Internet? And what do you do, hands on experience. And, you know, these people had had a lot of apartment complexes, and started managing some of their apartment complex, and that’s where I learned. And I was like, Ah, okay, this is how you do it. So that gained my confidence to go out and buy and you know, something that I did, you’re talking about groups and things like that. A lot of your listeners maybe not know this, but what I did is, there’s a small university in our in our town, and they get bequeathed homes, but it’s the alma mater. You know, they just get bequeathed in someone’s will. This is their alumni, and they just get these homes. And I met with coffee when the guy that one day, this person that’s in charge of their real estate, and I was like, hey, I want to buy these. You become the bank, because you don’t want to be a landlord, I’ll buy em. You become the bank at, you know, whatever, percent interest for five years, and then I’ll get a bank note. And that’s how I got a lot of good deals on real estate, because these universities don’t want this. Yeah, so you know, for your listeners, if you’re in a small town or or even a big town, find out who’s in charge of the real estate, because there’s, there’s going to be homes that they

Sharad Mehta  11:58  
don’t that’s the first time I’ve heard that as a deal source, yeah, thank you for sharing. I

Mike Stohler  12:04  
actually bought a fourplex from from the university. Yeah,

Sharad Mehta  12:09  
right. So you it sounds like you were doing pretty good after initial failure, and thank you for sharing that. By the way, you were doing pretty good after that. You know you’re doing great with single family, multifamily y Hotel. That’s, it’s very unusual, like people would just keep scaling their multifamily but, well,

Mike Stohler  12:27  
the biggest reason is because it’s unusual, less competition.

Sharad Mehta  12:34  
How do you go about buying a hotel? It’s the same

Mike Stohler  12:37  
as well. It’s not the same as multifamily. It’s, it’s, there’s, I do franchise. Most of them are franchise hotels. The ones we have that we’re we have one in Spain, and another one we’re getting ready to buy, do syndication for there, they’ll be high in boutiques, so they’re independent. But how do you do it? You have to have experience, because you’re not going to buy Hilton. Say, Hey, I’m a multi family guy. I’d like to buy Hilton. And they’re like, going, yeah, go away. Go away. So you have to have experience someone. And that’s this, this partner that I told you about. I ended up doing a JV agreement with him on that first hotel because he needed to be on the note. He needed to be on the franchise note because they didn’t know me. He had 2530 years experience. So you have to have someone that knows what they’re doing before Hilton or Marriott or whoever trusts you to run their franchise, because we are the face of their franchise. If we run it into the ground, it looks badly on the franchise. And then you have to get be approved by the franchise. You have to be approved by the banks. It takes probably six, seven months max, to close a hotel. There’s just a lot, a lot, a lot of due diligence. You know, there’s, you have employees. That’s the difference between multifamily and, you know, I may have 12 to 20 employees at one hotel, a lot of vendors. So it’s just a lot, look at the due diligence that you do on multifamily and times it by about six. Okay, that’s a due diligence that you have to do in hotels.

Sharad Mehta  14:06  
Can you walk me through, like, financials of a hotel? Like, just walk me through a deal example of one of what does an average fee look like for you when you buy a hotel? I’m really curious. Like, it sounds like it’s a lot more work than my Thai family, but the ROI must be good enough for it to, you know, make sense?

Mike Stohler  14:24  
Well, you know, I pulled up one I just got back from Tulsa, and I’m looking at purchasing, opening up a syndication, probably be opened up in maybe two weeks. I just have to do the deck, you know, and do the paperwork, but I’m looking at this hotel in the Tulsa area, and it’s six and a half million Okay, 30% down. And when you look at the cash flow summaries, the depreciation, you know, here’s something else with the hotels, as I get to do, cost segregation. Options. If your audience doesn’t know what that is, I can accelerate my depreciation all of it, because in the hotel, it’s like every lamp, every desk, every stapler, all these different things, has a depreciation schedule, and then I get to accelerate it. And that is a huge tax savings on like the K ones, for people who invest on the limited partners you do, I look at all the expenses I have, you know, the property management group that I work with, and we look at, how can we, this is same as multifamily? How can we change the expenses? How can we save on these expenses? Do we have any leverage on the vendors that we know. And like, for instance, this deal that I’m looking at in our we use, like leveraged IRR to look at,

Sharad Mehta  15:52  
what’s that? What’s the leverage IRR?

Mike Stohler  15:54  
So that’s so it’s internal rate return based on the leverage financing, the financing in in the equation. Instead of supplying cash, you can just say, hey, here’s IRR based on cash, and we’re not going to buy this type of asset for cash. So

Sharad Mehta  16:10  
it’s a six and a half million hotel. You’re putting about roughly about 2 million down. Yeah, you’re getting a loan for about four and a half million, right? Yeah. It’s

Mike Stohler  16:19  
like around, I think 4.5 million we raise, we raise a couple 100,000 for capital costs, you know, for the, oh crap. We didn’t know about that once we get into it, you know. So we want least two months of of cash flow, because you don’t know what you’re getting into. There’s always surprises.

Sharad Mehta  16:39  
So getting commercial loan from the banks. How are the loans? Yeah, are these, like, 30 year amortization or 25 years? Great

Mike Stohler  16:47  
question. Great question. So big, one of the biggest difference between hotels and multi families, hotels are considered a business, okay, okay, it’s, it’s a business that sits on real estate. So we have two different place. For instance, like during covid, I was able to get PPP loans, eidl loans, bit small business grants, and that kept us afloat during covid. The leverage part, there are a lot more different types of loan options out for out there for hotels. I can do a conventional I can do SBA, I can do CMBS, which is a market based security. There’s insurance groups.

Sharad Mehta  17:30  
What’s an average interest rate right now?

Mike Stohler  17:34  
And that’s why, you know, there’s just no it’s why we’re not buying a lot. We’re looking at around seven and a half.

Sharad Mehta  17:43  
Okay? That’s kind of on par with what you would get on the residential, commercial and then what’s the amortization period? 25 years? And is any it’s the loan term for five years? Yeah,

Mike Stohler  17:56  
it’s either five, seven or 10, just depending on okay, but most of them are five to seven years, and they just do an interest interest rate reset, okay,

Sharad Mehta  18:05  
every five, 710, years, yeah, so

Mike Stohler  18:07  
it might be a 10 year loan that resets it five years. Okay, okay, got it that state,

Sharad Mehta  18:15  
right? So you’re putting 2 million down, getting a loan for about four and a half million, and plus you have another 200,000 for you know, oops, crap, we missed this. What happens like, how much not rent, how much revenue? You know, would you expect on a monthly basis? What would your expenses be on something like this?

Mike Stohler  18:38  
Well, I don’t, I don’t really go by monthly. I know that first,

Sharad Mehta  18:42  
first, just like, however you I’m like my noi.

Mike Stohler  18:45  
We’re looking at an noi of around 660,000 year one. Okay, that’s so NOI is around 660 analyze debt payments can be around 410, okay, I think based on that, and then you have, and that brings us down to what we look at as a debt coverage ratio. We want it to be above one, of course. Okay, so it gives us a, you know, debt coverage ratio about 1.6 and a debt yield of 14.2% so we look at the debt yield based on what our debt coverage ratio is. When I go in and look at buying something, I do this analysis and see if is it big enough for stuff to happen. Okay? And then I’m looking at cash flow after the debt service, after year one of about 250,000 will be our cash flow. So

Sharad Mehta  19:52  
if you were to go out pay cash for this six and a half million, yep. And you, you’re making about. A six. Yeah, it is. It’s

Mike Stohler  20:05  
about 10, little over 10% okay, and

Sharad Mehta  20:07  
then how do you go about, like adding efficiency in a hotel business, is that like negotiating with the vendors on lower rates, it is increasing you,

Mike Stohler  20:20  
yeah, go in and you go in and immediately look at sales and marketing. Okay, what are they currently doing? I noticed that in this particular hotel, they don’t do any type of work with the franchise. So the franchises have their own team that help in just sales and marketing, and it’s kind of like a gas station. I can the difference between multifamily and hotels is I can change my rate four or five times a day, every day. Okay, where you’re you’re stuck in a six month or a 12 month lease as 1000 a month, or 1500 2000 a month. If a concert’s coming in, it’s 200 a night during the busy you know, it could be 150 it could be 80. I’m just changing it. You can do they’re special. So it’s, we go in and we hook up. And I noticed with this hotel, how can we do efficiencies? Well, they’re not using the franchise of sales and marketing platform, so they don’t know. It’s like, going, how do you determine your we call it ADR, your average daily rate. How do you know? How do you determine that needs to be $110 like, well, I don’t know. We kind of look up, see what the competition’s doing, and I’m like, Oh, wow, okay, boom. There’s, there’s a lot of efficiency we can use by using our analytics, and we have software internally, plus using this franchise’s software to really fine tune the ADR, Okay, that’ll increase the occupancy, because we’re, we’re constantly kind of moving it around. And then we look at our comp set and see what they’re doing, and they have, the franchise will have the ability to look at our comp set, which is all the other hotels in our type of class within maybe a three mile or five, five mile radius, okay? And then it’s just kind of like, what the gas stations do, you know? What? What’s shell doing across the street? You know? And so they’re just kind of playing with each other, and we can do that through analytics. We look at the vendors that we use. Can we bring anything in house? You know, why do we why are they spending this money on this? Is it required by the franchise? So we just go in and analyze every line to see what kind of efficiencies we can use. We just know that we kick, we kick butt in our property management, you know, how can we be more efficient with that?

Sharad Mehta  22:43  
It’s the systems and processes where you gain efficiency, and then even like 5% efficiency is going to have. It’s huge, absolutely,

Mike Stohler  22:50  
absolutely, you know. And then we look at cash on cash return year one on this one’s going to be about 12 and a half percent, okay?

Sharad Mehta  23:00  
What’s the goal with like a hotel business? Is that something is, it’s used for long term wealth, or is it something you come in, you buy a hotel, add some value to it, and then essentially flip it to another investor. Is that kind of is that? You know, when someone starts out wholesaling, right? They go less than wholesaling, then they do some fix and flip. But eventually the goal is to buy rental properties to build long term health. What does that look like in the hotel business?

Mike Stohler  23:30  
Hotel business is a little bit longer because it is a business, okay? It’s hard with a franchise to put lipstick on something like, if I’m buying a Hilton. It has to be a certain status. It has to look very good. There’s not a rundown Hilton or Marriott, right? So these are longer term deals, patient capital. The investors that deal I deal with in hotels just want they’re diversifying their portfolio. They don’t want quick cash. They don’t want these quick distributions. They want something that they can park, that something’s going to appreciate, it’s going to make the money. But it’s going to be seven years. You know, I have the ability to sell in five or 10, but then at the end of the seven years, I can do a cash out refi for those investors to one out. I usually have several investors that say, Hey, just I want to be part of that smaller group, you know. So they hang on to it, and then we hold it on, you know, for another several years. It

Sharad Mehta  24:36  
sounds like in terms of deal structure, it’s not very different from multifamily, but it just the due diligence part is where you make or break right? You really need to go through every line item and and the the value add for you when you’re buying a hotel would be if someone has average daily rate, ADR, of, let’s say, 100. It, you could see they’re not using the right analytics. And you could charge 110, one, you know, 2125

Mike Stohler  25:07  
immediately, bringing in sports groups, getting corporate contracts, contract, yeah, truck driver contracts, depending on where the hotel is. So you’re going out and getting, you’re getting contracts that you know they’re going to fill up 10 to 15 rooms a month. You do enough of those. And then you look at travel teams, you look at the concerts, and you go with the venues and say, hey, you know, if they’re coming to your concert, this this hall or this athletic field, they’ll they can stay at our hotel, and we give them 20% off the room rates. You know, it’s just doing these different types of contracts. And then sometimes, you know, we’ll change the franchise if we if it’s a franchise, we don’t like that, we know that there’s something else that could be there. Let’s say it’s a Radisson or a Wyndham red roof. And we know, and because I know the the regional directors of development for all the all the basic franchises, and I contact them, it’s like, Hey, you guys want to Hilton. You guys want to win them here. And they’re like, oh yeah, we do. We really need one. It’s like, okay. And then we negotiate with them to give us a deal, because there’s going to be some type of a contract break right with the old one, right? But just by switching a franchise to someone like, you know, for instance, radson has very, very small amount of reward members. Okay, okay. Windham has 100 million reward members, so I have 100 million potential customers if I go and the same with like Hilton Marriott, but some of these smaller franchises, you know, so you just kind of switch, because just switching to a different franchise immediately bumps the ADR,

Sharad Mehta  26:54  
absolutely, yeah. No, that makes sense, yeah. So let’s say someone listening to the show, right? They’re intrigued. They’re doing some multifamily and they want to start, you know, they’re curious about hotel investing. Where does someone even start? Like, do you go to LoopNet? Or what do you even go about contacting hotel owners?

Mike Stohler  27:16  
Boy, what you do is you, you contact an owner that you know, that you have, that you trust, and say, Hey, can I shadow you? How can I become, you know, the best thing is, become like a limited partner, okay, in the hotel. So then you learn from our reports and how we analyze things. Because, you know, once the syndications open up, there’s just all this reporting, and this, this open book, that’s what kind of sets us apart from, like these big REITs. Okay is my investors know my cell phone number. You know they know my email. I give them just reports and reports and reports and they they’re learning, and some of them I meet with every quarter my investors, because they’re learning, they’re like and they’ll have a stack of papers these questions for me.

Sharad Mehta  28:03  
And these are accredited investors. Accredited investors, okay, yeah, I

Mike Stohler  28:08  
don’t for right now. I just, yeah, accredited I just, I don’t want to, I don’t want to deal six months from now, say, Hey, Mike, I need my money back. You know, it’s a

Sharad Mehta  28:19  
minimum investment, it requires usually,

Mike Stohler  28:21  
usually 50,000 so it’s not that it doesn’t need to be that high. Most, most of the people give us a couple 100. You know, 250 a lot of 50. But I get some that are 50,000

Sharad Mehta  28:38  
What does average return look like for an investor who’s putting money in a hotel.

Mike Stohler  28:42  
The average cash on cash is about 15.7 we’re around 50% cash on cash returns. And the way we set it up is like an 8% preferred return. Okay, okay, so you get 8% immediately, and then it’ll be like an 8020, split. 80 to the investors, okay, 20 to the GP. Okay. And that goes on depending on the deal. It can be monthly returns, quarterly returns. It just It depends on how much money it makes and whether and like, like, here in Arizona, we usually don’t do distributions in the summer, because you’re not making anything in the summertime. No one’s staying in our hotels. And when it’s 110 right? So now we’re saving money. So then, you know, it’ll distribution start back up. But so that’s it. You know, it’s usually 8% preferred than an 8020 until all the capital’s paid back. Investment capital’s paid back, and then it’s just slush.

Sharad Mehta  29:49  
Got it? Wow, it’s not, it’s not a bad return at all. Like,

Mike Stohler  29:53  
well, you know, when you’re looking at multifamily versus now. I mean, this is now, even with the higher interest rate we’re. Looking at a 27% five year leveraged IRR, wow. Okay, so when you’re looking at a 27% IRR and a 15.7 average cash on cash return, that’s the difference between multifamily because it’s the cap rate. We don’t really go by cap rates in hotels, but, you know, if you did, it’s just a lot higher than multifamily, you know.

Sharad Mehta  30:30  
So as an investor, if I were to give you, let’s say, $100,000 in this project, right? I could make about 12 to 15,000 on it every year, and it’s paid either monthly or quarterly. Is that right? Am I understanding that correctly? Yeah, 8% would be preferred. So 101st preferred,

Mike Stohler  30:51  
and then so you’re getting that on top, and then whatever’s left, you get 80% of that distributed among, you know, however many investors, as

Sharad Mehta  31:01  
an investor, do I get anything on the back end? Oh,

Mike Stohler  31:04  
absolutely, okay. Oh no, absolutely. Yeah. I am. I do, ladies and gentlemen, if you ever look at any type of waterfall in a syndication, if there’s more than maybe two waterfalls, really, really, what’s

Sharad Mehta  31:19  
a waterfall? If you can explain? Oh,

Mike Stohler  31:21  
sure, absolutely. So here’s the way, here’s the way that I work this syndication. It’s 8% preferred return, right? And then you have a waterfall. So you have a what happens next? You know, you’re here’s the pond up here, and it’s 8% preferred return, and then it kind of falls down to the next batch of money that’s called a waterfall, and that’s the 8080, 20 split, okay, and then you could have another waterfall that says, if we make more than 15% or 20% then it flips, I get 80% you get 20 and then you could have another waterfall. So the more waterfalls. What happens is the sponsor or the GPS trying to find out how they can make money. Got it? Okay, okay. So it’s like, if this happens, it changes the deal. If this happens, it changes the pool their pot. I do one waterfall because it’s like, look, the investors are number one. Okay, I don’t make my fees, or any type of distribution, or any, any of mine, if they don’t make it, okay, I probably the only, I’m probably the only GP in the world that does that, because most of them sit there and just say, we’ll run this asset into the ground as long as I get my fees right. I just, I just, I morally caught my Midwest upbringing. Morally can’t do that like so in the summer for the hotels I have in Arizona, I’ve contacted my CPAs in my bookkeepers and says, cut off all of my stuff, because now we’re in asset protection mode, right? I mean, we’re everything’s fine, but we know that it’s going to be probably lose money during the summer months in Arizona,

Sharad Mehta  33:09  
right? Okay, yeah, because no one’s traveling there. Yeah, yeah, no

Mike Stohler  33:13  
one’s traveling. So why would I, how could I ever feel good about hey, still give me my 2% here, my 1% here, you know, my different allocation fees. I just can’t do that. I am I just morally can’t do it. So once it comes back up, then I then, you know, there are fees that I get, 1% here, 2% there. Okay,

Sharad Mehta  33:38  
and what’s your goal, looking ahead, three to five years down the road, like, what do you see yourself doing? Sure,

Mike Stohler  33:44  
great question. So I’m getting ready to do syndication on probably this one. You know that I’m not going to give you too much detail and but you know, I’ve given you the numbers, probably open up this syndication. We’re getting ready to open up a an international syndication. So those of you that think it’s sexy to own a capital in Spain, a castle in Spain, we’re getting ready to open up a syndication in Catalonia. It’s about an hour and a half northeast of Barcelona. Catalonia is the whole country, and I Ehsan rishat International. People think it’s like, Oh, my God. Why would you ever do that? It’s it’s a lot easier to work with. You know, we’ve gotten so complicated here in the USA, with people not wanting work, or they’re wanting too much money to work, and they want only work four days, taxations, all these different things that just the cost to build, the cost to maintain here in the United States, I can buy this castle is in the state that was built in 1610 Wow, and it’s on 107 acres. Ehsan rishat, and it’s going to be, what we’re going to do is a high end boutique, okay? And it’s going to be that destination wedding. It’s going to be that corporate retreats. I’m not too interested in renting it out nightly, yeah, okay, whether it’s one person or 18 people, you just buy the whole place, okay, right? And that’s going to be phase one. We’re just going to go in by and there we just go and buy cash. Okay, we’re not going to have any leverage on it at all.

Sharad Mehta  35:29  
I’m just curious, what would something like that

Mike Stohler  35:32  
cost, if you can believe that all in buying it, renovating, paying off the the 85 year old owner, 107 acres. It’s a nine room castle built in 1610, all in $2 million Wow, that’s amazing. It’s amazing. And, yeah, so. But here’s the thing is, they’re they’re trying to get outside. If you look at Black Rock, if you look up these huge, REITs. They’re all doing articles. Why they’re going into Europe. Interesting. They’re taking, they’re taking kind of a break here in the United States. And Spain is one of those big places. You know, the southern part of Europe is really, really big. And we’re looking at Spain, Portugal, Italy. We’re staying out of Britain, Germany, we’re looking at Portugal. But, you know, Germany and England is more US prices,

Sharad Mehta  36:28  
okay, okay. And the taxation is higher. Taxation is a lot higher, and they’re giving

Mike Stohler  36:33  
us breaks. And you know, phase two, what’s really, really big in Spain, we have 107 acres. We’re going to put little Yorks or pods, okay, spread throughout the forest. So it’ll be phase two, and the van life, the camping life, you know, there’s going to be all these. I love

Sharad Mehta  36:51  
to see pictures of it. Yeah, that sounds amazing, but 2 million, it is $2

Mike Stohler  36:56  
million and if I showed you pictures, you’d be like, going, Oh my gosh. You know, it’s like, I want to live there so bad. That’ll be a really fun project. And it doesn’t cost that much to get into $2 million and and what’s great about there, you just need a caretaker.

Sharad Mehta  37:17  
Yeah? You know you need, yeah, you just have someone local, someone

Mike Stohler  37:22  
local, that’ll, that’ll live on site, caretaker and like a married couple, so just some of the maintenance, you know, the housekeeping part, that’s perfect. And that’s all you need. That’s, that’s all you ever need. And what

Sharad Mehta  37:41  
I love about you. It’s just like, you love taking action. It’s like, yeah, yeah,

Mike Stohler  37:46  
it’s fun. It’s a dick, yeah, it’s it. I

Sharad Mehta  37:48  
totally get it. It just, you love taking action, you know? Like, just think big, take action. We’ll figure it out. I love that, I love that, but

Mike Stohler  37:56  
I’d still do the a lot of the analytics, yeah, of course. But then it’s like, well, here’s the whole thing. Just do it. You know, something else I’m getting ready to build, if it ever gets approved, I’m getting ready to build a big luxury hotel here in Arizona. It’s going to be the heart of everything. There’s a lot of approvals that need it. So, you know everyone, if you’re interested in luxury rooftop bar, you know the whole that’ll be more like a $25 million project. So we’re getting ready to do that, but so we’re busy. We’re busy. The team is busy, but we’re having fun. It’s we’re finally getting to the point out of covid where things are starting to happen. I just need someone and somewhere to wake up and, you know, fix the economy and interest rates and inflation, you know, just figure it out. I

Sharad Mehta  38:53  
think it would be interesting with the election year second of how that unfolds, how that starts affecting things, you know, the real estate market and economy at the macro level. So Mike, this has been absolutely incredible. We just have couple of more questions to ask you sure, what do you do for fun, like buying hotels and stuff, hotels? What

Mike Stohler  39:17  
I’m going to have fun is, is, is going to be able to go to Spain to look at my asset, and it’s all going to be tax deductible. That’s, that’s fun. So that’s another thing that people don’t realize, if they invest in the Spanish asset, it’s like, going, Hey, Mike, you know, I need to go and visit my asset in Spain. Like, Oh, yeah, it’s a business trip, right? Yeah. But yeah, I like to maybe play guitar. Yeah, a little bit I got, I’m a golf fan addict. Nice. I like to hang out my downtime. I love to hang out. We have a place up in the mountains. I like to just go out on the porch and stare at trees for like, just. Uh, meditate, and just, yeah,

Sharad Mehta  40:01  
that’s amazing. What’s the one book? I think I know the answer to this. What’s the one book that’s had the biggest impact in your life? It could be business, personal, yeah,

Mike Stohler  40:13  
there’s two. You know, Kiyosaki book, Rich Dad, Poor Dad. But then the book by John Burley. It’s the money Secrets of the Rich.

Sharad Mehta  40:25  
Money Secrets of the Rich interesting, and what

Mike Stohler  40:28  
it does is it teaches you, once you start getting money, you have to change the thought process. You see all these Instagram 20 year olds that make millions and millions, millions, and they’re buying Lamborghinis mansions. You know what? Instead of Lamborghini, I’m gonna buy another house, I’m gonna buy another hotel, and then I’ll be able to, you know, the money will come. And now I have just passive incomes. I can do whatever I want. But that flipped the switch on how the wealthy think, right? And that was a really good book. Yeah,

Sharad Mehta  41:02  
yeah, thank you for that. Yeah, it’s I’m reading psychology of money. I forgot the author’s name, but I was looking for another book recommendation. So perfect timing on that. It is right. If you could spend a day with one person, dead or alive, who would you want to spend the day with and why dad

Mike Stohler  41:22  
would be one of my grandpas, because, because I miss him so much, he’s the one that taught me how to fish, how to hunt, get on the canoe and just go out and and just have a good time alive. You know? What? My god. What? How crazy would it be to spend a day with Elon Musk? Oh, yeah, you just wouldn’t. You’re just like, I’m just going to go into it, and you just don’t know what is going to happen.

Sharad Mehta  41:48  
Yeah, that’s yeah, all the crazy things he’s got going on. Yeah, you might be you guys. You guys could talk about maybe opening the first hotel on Mars. Yeah, my, my, this has been absolutely incredible. Yeah, the first person on the podcast talking about hotel investing and buying a castle, building a luxury hotel, I absolutely loved it. If someone wants to connect with you, learn a little bit more about your journey. What’s the best way for them to do that?

Mike Stohler  42:17  
Sure companies. Gateway PE is in private equity. Gateway pe.com is the website I have my own podcast, the richer geek, perfect and LinkedIn under Michael Stohler, it’s perfect, perfect. All

Sharad Mehta  42:33  
of that in the show notes. Thank you so much for coming on the podcast. This was absolutely incredible. Thank you. Yeah. Thank

Mike Stohler  42:39  
you very much for having me. You.