Leveling Up: How To Turn STR Success into Boutique Hotel Ownership | Kim Herrlein E11

Are you ready to take your short-term rental success to the next level? In this episode of The Hotel Investor Playbook, we sit down with Kim Herrlein, an accomplished STR investor who transformed her success into hotel ownership.

Kim’s story isn’t about leaving short-term rentals behind—it’s about using her knowledge to scale into an exciting new chapter. She reveals how she sold a high-performing vacation rental to buy a boutique hotel for under $1 million, the challenges of renovations, and how she built a remote team to manage it all.

Here’s what you’ll take away:

•Insights into why short-term rental success can pave the way for hotel ownership.

•Practical tips for finding and purchasing boutique hotels.

•Lessons learned from operating a hotel remotely and turning it into a thriving business.

Whether you’re considering your next big move or just curious about the world of hotel investing, Kim’s story is both inspiring and actionable.

Connect with Kim Herrlein:
Instagram: @purveyorsofleisure
Website: www.purveyorsofleisure.com
LinkedIn: Kim Herrlein, M.A.
Amazon: Kim Herrlein
Linktree: purveyorsofleisure

Connect with Michael on Instagram or LinkedIn.

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Transcript

Michael Russell 0:00

Are short-term rentals the ultimate destination or just the beginning of an even bigger journey? If you found success in the short-term rental market, you might be wondering what's next. How do you take what you've built and scale it to something even more impactful? In this episode of the Hotel Investor Playbook, we sit down with Kim Hairline, a seasoned short-term rental investor who turned her years of success into the next level of real estate investing hotel ownership. Kim didn't leave short-term rentals because they weren't working. She leveled up because she saw an incredible opportunity to apply what she learned and scale it up. In this episode, Kim shares why she sold her top-performing vacation rental at the peak of the market, how she identified and purchased a 20-room boutique hotel for under $1 million, and the lessons and challenges she's faced transitioning from STRs to hotel operations. If you've ever wondered how to turn your shoulder rental wins into an even bigger success story, this episode will show you how.

Kim Herrlein 5:09

We sold a home primarily because the neighbor across the golf course was out to get us. And he said those words. He said those words on the phone to me. And we had been looking at, had been looking at small motels for a while. We had a lot of experience handling things remotely. Everything we from the very beginning, we had a tech stack and always a new one, you know, we try a new app, add a new part to the stack. And then when it wasn't working, obviously modify. And I think we had a lot of confidence that between my virtual assistants teams that have been with me for over three years and our ability to work with tech, that we could handle a contactless hotel operation. And then quite frankly, when you look at how many people I was hosting on a regular basis, because these homes that I had were six bedrooms to 11 bedrooms on any given weekend, if there's 20 people per home, right? I'm hosting 200 people. And so it was a no-brainer. There was nothing to be afraid of as far as, okay, a hotel, you can and the and the fading couch occupancy is only at 56. So it's it's actually smaller than even just five of my homes that I have now, as far as a number of people. So it just seemed like a no-brainer. It seemed something, uh, there was a really easy value play. I mean, this property had been on the market for quite a bit. Uh the buyer, sorry, the seller was motivated. Uh, he had inherited a number of small motor lodges, if you will, and was not interested in improving. It was quite frankly known as a place to be wild and you could go and shoot guns. And, you know, so it had this like kind of sorted reputation and you know, the the uh the decor was lacking to say to say it nicely. And it just seemed like a really easy way, a really easy value play because there was so much we could do so quickly to make it better.

Nathan St Cyr 7:25

I love this. So a couple of things that that that you just said in there that I want to one of them I want to circle back to, um, which is your VA team and having the confidence to operate. So I'm really excited to dig into that part. Um, but before I do, you kind of hit our first pillar of of teaching, which is the the acquisition side. And so you mentioned that there was this opportunity and but how did that number one, did you know that you were in the market to look for a hotel? How did this property come to be from the acquisition side? Was it intentional? Did this just happen, happen to come along? Um, how did where did this come from?

Kim Herrlein 8:05

John, my business partner, my financial investor, he and I had been talking about it for quite a bit, I'd say somewhere around six months or so, and had our filters set for properties just like that, you know, under a million, our our uh criteria was under a million at the time. And so it was a uh fabulous price. It sat for a while. We didn't have quite the mobility at the time when it first came on the market. And we just had it. I mean, I still can see it on my date stamped on my Slack channel when we first started talking about it to when we actually went and saw it and then obviously bought it and then now operating it. So it's uh it was quite a journey, as you know. I think I mentioned uh to one of you about how it, you know, I underestimated the core, how long that would take, the project management of that, and just even supply chain, all the things that happen when you're furnishing a 20-bedroom place. And I think I thought, oh, well, I'm I've already had the design details figured out. I have, you know, I know it it sounds like, oh, that should be easier because you have four of those rooms or five of these rooms. Well, you still have 20 bathrooms. And I don't know about you, but there's that many homes that have 20 bathrooms, right? And you know how long a remodel takes in a home. So that's like a good lesson, definitely that I've learned for going forward.

Michael Russell 9:30

So I love that. This is a 20-bedroom um hotel in northern California, just outside of Santa Rosa, right? Cobb, California is about an hour, an hour or so from Santa Rosa.

Kim Herrlein 9:41

Perfect, yes. Hour from Santa Rosa.

Michael Russell 9:44

You live in the Palm Springs area, right? That's correct. So how did you locate this hotel? You said your business partner uh had a role in in finding it. Did you locate it by searching online through one of the like loopnet? Or how did it Craxy?

Kim Herrlein 9:59

I think it was Craxy, yeah. Yeah, we just had our filters set, and you know, we we've we've been doing this for a while right here.

Nathan St Cyr 10:08

Here's the killer thing that like when you just said that to me, because I've you know, I went on obviously and looked at your property and I'm like, oh man, this thing is epic. This is so sick. And um, we'll put it in the show notes so that that um our listeners can go on and check it out. But when you when you just hit me with we set our buy box at under a million dollars, I think that that's really important to to just point that out. Like, I don't I think sometimes when people think about purchasing a hotel, they're like, man, I you know, I I spent you know 800,000 for my STR or I spent you know 1.2 million on this prime location on our short-term rental. But for you to to to say, look, we set our buy box at under a million dollars, and you ended up with a a 20, 20-room hotel, um, I think that that's worth first of all pointing out, like, dang, that's awesome.

Kim Herrlein 11:03

Especially in California. In California. Yeah, exactly. Exactly. I mean, that that's really where I think the combination of having the funds and uh and knowing that that's where we wanted to head anyway. We just we saw it happening. We saw that there was more competition and that there was definitely more ordinances and people paying a lot more attention to that. Uh, we had always ran it professionally, so we didn't feel that that was an issue, but it just became something that we had to look for. For instance, the home that we're speaking about uh was a six-bedroom. It was a track home at the end of a cul-de-sac. Like no biggie, nothing special about it. And we were able to 3X and be able to purchase.

Michael Russell 11:52

So what does that mean? You bought a you bought a home that you were using as an STR in the Palm Springs area, and this single family home is what you sold at three times more value, and you use the proceeds from that sale to purchase your hotel. Is that what I'm hearing? That's correct. Can you walk us through that? Like what what was it?

Kim Herrlein 12:10

Yeah, we the what was the sale price?

Michael Russell 12:12

What did you buy it for? How much were you working with capital-wise?

Kim Herrlein 12:15

Yeah, so the the home was sold uh for 1.4 and we had purchased the home for five something, uh, probably put in about 50,000, 60,000 into it. It had been the returns were great for years, you know, it was grossing like 180. Don't forget, we are very close to the Coachella uh festival music playground. And so that was always a big bump. Like that month of April was always, you know, kind of three times the amount of the other months. But I would say, you know, it just was a solid 180. And uh yeah, we were able to sell at the at the top and and take that money and and find and simultaneously have the ability to pounce really on this project because I just think no one was looking in this area. And to be clear, it is close to Clear Lake, and people don't know, but there's this whole mountainous area between Calistoga and the Napa Valley area before you get to Clear Lake. This is gorgeous. It's it's it's nestled in the mountain, it's beautiful forest. And the town itself is so lovely and has so many unique factors. There's so many artists, like so many people that are retired from the Bay Area. So it has this unique blend of sophistication and artisans, and it the community has been the most I think from my end, but where I am the most surprised, where I didn't see it coming, was how much it mattered to this community, this hotel.

Nathan St Cyr 13:51

I love that.

Kim Herrlein 13:52

Because it's where their family, so what I my, you know, as I'm learning and I'm joining all the different, obviously, associations and all, and and basically my husband and I did move pretty much to the hotel starting March, April to really get thing, you know, get things moving. Uh, and then through the summer while we were hiring people and getting everything kind of to that next phase. Uh so it did take a little bit more than I thought.

Michael Russell 14:19

I'm sorry. What you're describing here, I think is is probably pretty common for a lot of our listeners in the sense that um presumably many of them are already involved in choice of rentals, right? And you were and you saw the opportunity with, you know, restrictions, regulations, ordinances that were being passed, you said, hey, I've got this property. Right now, prices are through the roof. We can capitalize on you know selling at the peak. And you know, quick math, it's you know, 900 grand or so of profit that you made from the time you bought it, the improvements you made, and what you sold it for. You take that 900 grand and you went and bought a hotel. How much how much was the hotel?

Kim Herrlein 14:57

I think it was 780.

Michael Russell 14:59

Okay, so you had more than enough to cover the loan then. Is that right?

Kim Herrlein 15:04

Well, we wound up using a hard money loan to do the construction management piece. Yeah, that because we I mean we gutted the place.

Michael Russell 15:12

Gotcha. But you okay, so let's let me go back here because the what I'm recognizing is you had about $900,000 or so of profit that you locked in by selling that home. And previous to selling it, you were making money off of the short-term rental. Let's let me ask, how much were you making in the short-term rental annually?

Kim Herrlein 15:34

Gross was $180,000, so I think probably around $80,000, $90, something like that, as far as the let's call it 90. Call it 90. We owned it since 2016. So 16 through 22. What's that? Six years.

Michael Russell 15:51

So in in rough terms, though, you took an asset that was yielding about $90,000 a year, and you capitalized on getting $900,000, which would have taken you 10 years of operating that, 10 years of your work and effort to go and capture 900 grand. You 10x'd what it, you know, you you captured 10 years worth of income by selling that. And that is that's a demonstration of the velocity of money, which we had a previous guest on, Cassie Warren, who introduced us to this concept, where he is shifting out of his short-term rentals. He's selling them, and he is investing the money from those to scaling up into hotels. And what you've just demonstrated is that's a perfect example of how you can do so. And you you can increase the return on the capital that you've accumulated that may be tied up, that may be sitting in equity, sitting in a short-term rental, you've been able to um to tap into that and increase its value by by getting that $900,000 up front instead of having to wait 10 years to accumulate it.

Kim Herrlein 16:53

And I imagine right now, I know that the new owners are running it as a short-term rental, and every now and then I'll take a little look to see the calendar. And, you know, I mean, it's it's just where it is. And I can't imagine looking at 10% return without I mean, that's if they're self-managing, right? So I I don't know. I don't know how people are penciling some of these numbers, quite frankly. And I think that's why you're seeing uh an interest so much in the commercial space. I think that's another thing to note you don't really own the business of your short-term rental to a certain degree. I mean, for us, even though we have a brand, purveyors of leisures, you know, we've always had direct booking capabilities. I think people just are more comfortable with Airbnb and Verbo as as they're, you know, kind of a someone in between. Uh, and I think also because you're dealing with for us specifically, if I were to say to you, Michael, go out and find a vacation rental for everyone from mom to to, you know, your siblings to their grandkids, find 24, find a house for 24 people, the chances of people wanting to go direct is a little bit slim, that's where everyone feels comfortable in the transaction, especially at the rates that we're charging, right? Like $2,500 a night minimum. So this is why I think despite us having a brand that and having always had the ability to book directly, people still choose. I'd say about 60% is still OTA. So I think realizing that you don't really own that business. And that kind of that kind of freaked me out a little.

Nathan St Cyr 18:34

Well, I think that's a great point. And I think that, you know, the other side of it is from owning the business and valuing the business. Right. Right. So your that short-term rental, you know, you may have increased the value of cash flow by taking what, if it would have been a long-term rental, and you know, maybe that home rents for three, three, four grand, right? And and it nets $30,000 to $40,000 at the end of the year, you made it a short-term rental, which created more cash flow, and you net $90,000. So that's a that's a nice jump in cash flow. However, the business, at the end of the day, the home is worth whatever the home is worth in the neighborhood. And you maxed out on, hey, it was great timing. We were able to really maximize on a great timing of exit. But now you've taken and shifted that $900,000 into an asset where your business is going to have value. The more NOI, net operating income that now you can go and the better your brand grows and the better your group bookings that you bring in, that you're able to go and market, you dig into marketing and you dig into all these areas, and you're able to really pull all of those levers to impact top line revenue and then efficiencies. And I want to talk about that here in a minute. Um, you're able to create and leverage that money, that 900,000 now is not stuck at 900,000. And you're in control. It's your business. And it's valued as your business.

Kim Herrlein 20:05

Yes. And precisely.

Nathan St Cyr 20:07

I love that. I love that. Okay. So I want to get into the operation for a second. So you had mentioned that you had this, you use the words, you had a VA team that you'd work with for several years, and that provided you with trust. You're like, I trust that I can take this team and then that it will translate into running this boutique hotel. And so can you walk us through from an operational and staffing standpoint? Um, number one, the way that you have it set up right now, the hotel, is it um is there a check-in? Do you have on-site staff? Is it remote check-in? Can you just walk us through um what it looks like right now and then how many team members are operating in the background?

Kim Herrlein 20:55

Sure. So we have a PMS system. We're using cloud beds and our virtual assistants are basically trains on answering all the FAQs around anything to do with the hotel, the room themselves, obviously location specific recommendations, so on and so forth. So just the way you would train your front desk. And so we've been, you know, gone through that training, and that had been happening along the way while I was, you know, we were still on the end point of the design and getting everything up and running. So we had enough time, you know, some good time to really do some troubleshooting. But I think like anything else, like until something happens, you don't know how to come up with the process for it. And so I learned this now, nine years, 10 years into this business where you can't think of everything. And you're gonna do your very best you can. And I think having the faith in my team that have been with me over three years. So I have two virtual assistants that were uh US daytime. And those are my main, I'd say primarily handle kind of the heavy lifting. Uh and that that that was more so actually with short-term rental than it is with the hotel. And I'm noticing this is this is the new, this is the new for me, the cadence, right? As you can imagine, people don't book the same day for eight, you know, 18 people. So for me, the learning curve here is the speed of which people are coming and going, booking, changing their minds, they're gonna stay another day, they're gonna leave a day earlier. You know, this is just this is completely new to me.

Michael Russell 22:30

The turnover is much, much quicker, what you're saying, right?

Kim Herrlein 22:34

Yeah. I mean, you know, when you're when you have an 11-bedroom house, that plan is in place for like three months. As opposed to I'm driving, I'm gonna go to Harbin Hot Springs and go for a soak. Oh wow, I heard about this new cool boutique hotel. Let me go check it out and boom, get a room and leave. I I don't even know the person's name before they leave. I mean, it's just like completely different avatar. So that's been, I mean, that's fun because it's new and exciting. It's uh, but my team is handling it really well. Uh at night, I have our US nighttime. I have two other VAs and they handle mostly my social media and marketing and also my security, because we have always had uh a need to have security surveillance, like making sure all the testable readers and you know everyone's behaving at the homes. And now they're just obviously so they've added basically their their normal reservation uh specialists that they are and you know, to now front desk of the hotel. And I have uh three housekeepers that are amazing and happy to be fluid, which I can't speak to enough because one week it'll look like, oh, we only have two or three bookings. And then that day, that's another thing that I've learned. Also, I want to just go back for a second. I think not understanding my avatar is is real. And as much as I like to think everyone's going for the soaking in the hot springs coming to stay, there is also a number of people who are in the area to do um working. Uh, there's a geothermal plant, there's engineers coming through all the time. So we have a pretty steady flow during the week of people that are there to work. And so, and with that, we've changed some of our protocols. We give them extra coffee, right? Like the things that a person would want after they came back from work and not have to think about it the next day. And so it's just kind of been learning as we go. Uh, contracting with the housekeepers as opposed to hiring, I think is is the way to go at first with this sized property. Uh and then I have so Al Foreman, who had worked and managed the project for two years uh on the renovation, he lives conveniently on the mountain and is on my on call maintenance. And so here we have someone who knows everything about this property, more than myself or John will ever know, really, because he was he was in it, right? Yeah, he was there when there was, you know, no walls kind of thing.

Michael Russell 25:13

So okay. Can we oh I wanted, sorry, Nathan. I was just I I gotta know about this housekeeping. And so I want to go back to that because I'm like, that seems like the biggest uncertainty because you get a spike in demand, and you're like, oh my God, we got to get people to clean. We don't have you know enough cleaners, and then you have these doldrums where maybe your vacancy is higher, and so your staff or your cleaners that are relying on that income, right? They're like dependent on it. They might go and find another job, or they, you know, they might just not be earning enough to sustain themselves. How do you deal with that part?

Kim Herrlein 25:48

I think it was a bunch of trial and error in the very beginning because it is somewhat remote. And what I've I learned was that people prefer that live on the mountain to stay on the mountain. And so it became very clear that I actually had some leverage for the people that wanted to work that lived on the mountain, because they had been having to, you know, they would travel sometimes 45 minutes to an hour to work uh each way. And some of them are moms, and you know, it just didn't, it just took time out of their day, let's face it. The commute, considering it's like a rural area, you don't think of a commute, but it's really windy. And so a 15-mile drive could take you 40 minutes. Uh, and so I found out that that was something that worked to our advantage, that there were people that really wanted to stay on the mountain, uh, especially going into the winter months with, you know, it's a lot of rain and a little bit of snow, but mostly just really uh, you know, inclement weather. And I was just honest. I just started off like I this is me. I said, I don't know what I'm doing. I mean, I literally said that because my housekeeping team that's been with me for almost 10 years has handled everything here in Coachella Valley. I have no, I mean, I don't have to worry about anything. They know my pet peeves, they know I don't like when there's not enough wine glasses, coffee mugs, and forks. And as long as you give me those three things for 40 people at the houses, I'm good. And with this, this was a completely different, different set of circumstances. And I said, we're gonna work this out together. We're gonna figure out how to create the checklist. And you know, I'll tell you that the one thing is technology does not work up, work that great up there. Just it's it's it's intermittent. And, you know, I'm here I am, I'm tech heavy, apps, everything. I mean, I just run the whole business, run my phone. And we were having difficulties. And I said, you know what? Screw it. We're just gonna, we're gonna not use that management program that was part of CloudBes. It's called Whistle, and we're gonna create our own. We're all using Slack that seems to be working really well. We're gonna create the entire system using Slack. And so now we have workflows, and so that that's been really cool because I've involved them in the auto, they have an autonomous attitude, personality type. Like I to me, that is who I like to work with. And I said that from the beginning to each and every one of them. This is not going to be the kind of job you're clocking in and clocking out. I am going, I will assess on a regular basis your productivity because I could see how many rooms are turning based on how many hours I've been paying and so on and so forth. Uh, and it's been amazing. I mean, they have they're set, they're sending me processes. I'm like, this is awesome. And so far, so good.

Nathan St Cyr 28:49

I think can I cut, can I just can I there's you you just you just gave us some nuggets, and I want to I want to make sure to seriously though, I want to make sure to highlight a couple of them.

Kim Herrlein 29:01

Okay.

Nathan St Cyr 29:02

So it was just really refreshing. Just I just I want to tell you that it was really refreshing for you to say, look, I just told them the truth. I didn't know. I didn't exactly know what I was doing. But I mean, that's I think the one of the biggest things that you know that prevents people from taking action is the fear of everything that they don't know, right? It's that just it's that fear, the fear of failure, the fear of what's in front of them because they just don't know, and you're not gonna know it all. And it's okay if you go in with the mindset like you did that was look, we're gonna figure this out together. And I believe in myself, I'm capable, I've done this, I've built this, but now there's gonna be a whole new learning curve and we're gonna go figure it, figure it out together. I just love that you uh, number one, that you had that attitude. And then number two, that you're able to communicate that, look back, reflect, and communicate that now, because it's such an important lesson, I think, to so many people that are considering making a shift is like, look, it's okay, you're not gonna know it all. But if you're willing to learn, if you're willing to be honest about that, be vulnerable, uh, you're in a good, good place. So, and then I also love that as you were going through these systems of figuring out, all right, well, what is my competitive advantage? You you like listen, you're like, okay, here, here's a competitive advantage that I have. I I didn't know it when we moved here. And then I'm gonna purchase this, but now I'm starting to really listen to the feedback from the people, and here's a competitive advantage, and I'm gonna capitalize on it. And so, where you know, somebody might from the outside like us, we're like, how do you hey I'm allowed? But you're like, well, that's actually my advantage. I'm on the mountain, people don't have to lead. So I've created a great. And then lastly, I am a huge just like empowering people as a leader is um is it's just a critical component to team building and making people feel a part of a team. So I love that you said you moved off of whistle, you moved to Slack, and now you've really created this empowerment um of your actual team to make them feel like the way that they see things matters. And so, I mean, you just dropped nugget after nugget after nugget. So I wanted to make sure and circle back and be like, dang, those are some, those are some really strong, strong lessons there.

Kim Herrlein 31:29

That's cool. I think that I I probably if I had to be faulted for anything, this probably trusting people first before being proven trustworthy. And I'm not gonna change. That's what I've decided. I I I don't need you to prove it. You'll prove it. Your your actions will show, and usually pretty quickly. I mean, if you give people enough room, they'll show you who they are pretty quickly. And I think that, you know, trying to fit uh, what is it, the old like round peg and a square hole, whatever. I don't know which way it goes, it's square hole. So one of those. I never, I'm never very good at these, but I shouldn't use them. Uh I think that the key is, and I have a don't have it right now, but I have a post-it that stayed with me on my monitor the entire time at the hotel when I was back and forth and living there primarily this summer. And it was from my, it was Joy, is my lead VA who's wonderful as her name says. She said, Don't worry, Miss Kim, we will figure it out. And I wrote that on a post-it and I looked at that every single day when I was like, I don't, how am I gonna how am I gonna solve this problem? I can't get anybody. I mean, I I mean, I am not a I I love tech to play with, but I'm not like an IT person. And we could not get somebody all summer to come up there. We had to finally get somebody from all the way from Sacramento. It was like he was so booked out. And finally, I'm just like, I'm figuring this out. I am gonna figure out how to put these state five access points on these switches. I don't care how I'm gonna figure it out, but I'm gonna figure it out. And we did. And I think it's just like there's a point where you cannot envision what is gonna go wrong. And that's why if you're gonna be really like stuck in your way, this is not for you. Any entrepreneur gig is not for you if you're like that.

Michael Russell 33:26

So you just you just said a word that I had an emotional reaction to. Um, you said the word wrong, right? And then I started thinking about well, what what could go wrong? You're operating this remotely. Your team are mostly VAs, presumably in the Philippines, right? Correct. And so when I think about the concept of operating remotely, I tend to drift to all the things that could go wrong. And so clearly you're comfortable in that world with the the risk, so to speak. Um, and you figured out ways to overcome it. But can you give us a couple of examples of you? Maybe maybe give us just one example of a situation where something went wrong that you gotta think about, you've overcome it, but maybe you didn't know or you didn't know getting into this and operating remotely. Can you give us an example of something that went wrong? Sure.

Kim Herrlein 34:20

Last week we received a text from an unknown person stating that she'd like for us to do a welfare check because she believes that somebody is at our hotel against their will. And now I'm like, okay, did not plan for this one. What had happened the night before was someone, three people had come on. You know, we have gates and everything, but you can put pedestrians and still walk through. So you can't drive a car onto the property without the codes and whatnot, but people can walk. And this person is looking for Monica. And we catch it on the cameras and we start, you know, and then obviously a guest that's staying there speaks to us and we calm her down. We get the police involved. Now we're putting two and two together that these people were looking for the person that supposedly might be at our hotel against their will. At the same time, the last thing I wanted to do was make my team scared or nervous because let's face it, I mean, anyone could say anything. At this point, the police had been there. There was no issue, according to them. And then subsequently, they called us the following day and said they'd like per, you know, they they would like to come and interview so-and-so in this room. I that's fine. And all throughout, my virtual assistants handled it perfectly. They, they, I I listened to all the records because we record every call uh through um whatever the program is. And I was able to listen to how professional and how she did not disclose any information without first coming back to us to make sure that this was okay for her to speak to the police officer in this way. And I was really impressed with that piece. And what I was extremely impressed with is that we were able to handle the entire situation and no one knew, other than that first guess, that first you know, time when the person was looking, yelling. So here you have a security breach, like a security issue, and we're capturing it, right? Because my security teams, we note the cameras are going off and signaling some things, and simultaneously this woman, you know, texts us. So the one nice thing too is everything is transparent. I can see every text, every call. Like I said, I listened to the recordings with her with my Henry Aun. She handled it so perfectly. I don't think I would have handled it as well. I think I would have been maybe a little bit more, I don't know, maybe would have asked more questions or I would have gotten, you know, want more details. And she really handled it so professionally and so well. And at the same time, my whole team on site does not know a thing about it. Because I don't want them, you know, it being that person's well gone. I mean, whatever that was, it was like this is something I have no experience with because you don't have 20 people at a house where you have this, you know, this is just such a strange scenario. I will say there was one time a domestic, domestic uh issue. But yeah, anyway. So that that's like an example of maybe someone's worst nightmare, right? That there's something going on nefarious at their hotel. You're remote, you don't have this front desk, and so on and so forth. And everything was handled as professionally as possible. And quite frankly, even if someone was there at the front desk, I wouldn't tell them to go up to that room for a welfare check. Until we understood, you know, until someone's truly quote unquote missing or what, you know, kind of. So anyway, it's it's it's brought up an interesting point. And now we're obviously doing a little bit more research on what were our rights and and you know what how to handle it, I guess if it happens again.

Nathan St Cyr 38:07

Sure. Yeah. But there was so there is no staff member there, right? No. You're handling all of this remotely. You can see everything visually because you can pull up, you can listen to all of the recordings, you can go through and communicate with the police officers. But in that moment, there's just there's nobody there that can actually go through and do that. It's like interesting. Yeah. I I guess you that's not the first thing you would think of think of when you're like, well, what could what could I wanted to share it?

Kim Herrlein 38:40

And I mean, I we'll see, yeah, you know, how much of it we share. But going forward, but I just think it's an interesting aspect because I I would imagine for most people, it's on the now, maybe because I mentioned it will be on top of their mind of like a security issue. What do you do? And I mean, let's face it, is it always so great to involve yourself anyway? Like, say I was out on site and I was at, you know, staying in one of the rooms and technically could handle it. I would call the police. I mean, I wouldn't personally feel comfortable, right? So it was so I just think that's probably like the worst case scenario, and it happens last week.

Nathan St Cyr 39:17

Yeah, no, that's that's fair. So when we break down the team that you have, the you said you have the two daytime um VAs and then you have two nighttime, and they're handling because there's less guest communication and other.

Kim Herrlein 39:32

Yeah, I mean they handle it also, they're cross-trained.

Nathan St Cyr 39:35

Yes, and are are they also handling your the five short term rentals that you you have as well?

Kim Herrlein 39:42

That's correct.

Nathan St Cyr 39:43

So you were able to basically just integrate them into taking on the additional property. That's correct. Wow, that's that's great. And when you when you underwrote this, um do you what what expense rate? Did you underwrite this to as being a remote operation? Do you remember?

Kim Herrlein 40:06

I'm trying to, I mean, it was so long ago now. Uh well, I know I knew for a fact that we were going to be replacing or or or omitting the $80,000 expense line item that existed there for their how they had run it prior.

Nathan St Cyr 40:25

For their stuff.

Kim Herrlein 40:26

Yeah. Yeah. And so I don't, you know, it's so new. You I'm still, I'm still learning how to even pay the taxes on it right now. But that's where I am. I'm kind of in the weeds with CloudBeds. Uh, you know, we we had managed this camp property outside Yosemite for a little while too. And CloudBeds is so it's just newer to me and and using that software. Uh, but yeah, so I mean, I just think we knew the value that we were about to add to this property and that based on what we've done in the past, and it just it just depends, you know, it's like this is gonna be a layup.

Nathan St Cyr 41:08

Cool. And and from going through this entire process, I guess this is this would be just last question. Going through this this process, if there's like one thing that you're like, I'm an S I've had success with STRs, right? And I can envision what it's like to go here, right? And I'm just gonna do it. But if there was one thing that if you could go back and and rewind time and and just give yourself a little bit more information or a little bit more educated on to help save you some time or money, either one, um, just one thing in that journey that you've learned, what would it be?

Kim Herrlein 41:52

I would have vetted construction companies a little bit more so and and really held payments to deadlines.

Nathan St Cyr 42:03

Okay. Can you go into that a little bit more?

Kim Herrlein 42:05

Yeah, we decided to uh do a a builder, owner builder. And so when we had received bids from numerous, first of all, I I don't know if you've seen this as well, I'm sure over in Hawaii, it's like this, but post-COVID, I mean, getting a contractor to come see anything was like pulling teeth for a very long time. They were so busy.

Nathan St Cyr 42:26

Yep.

Kim Herrlein 42:27

And when they finally came out, and by the five time they find, I mean, I think so we purchased the property, I want to say it was March 22. Uh, we didn't start construction until September. Yeah, September 22. And it took all those months just to get to the point to say, oh my goodness, like one, these numbers are inflated. Two, I think all to be fair, we were used to having labor more available to us in Southern California that was not quite as expensive. And we'd been working with a contractor for many years that knew our style and knew how to move fast and knew, you know, music to our ears like, oh yeah, I'll get that done this week. Like what? And that's how we moved. And I think for us, this was just a whole nother cadence. And when we finally made the decision, you know what, we're gonna just do this ourselves. We're gonna put together a team. You know, we had met someone who we thought would and did do a good job as a foreman. And we handled all of the purchasing and sourcing. And I mean, it's one thing to pick out wallpaper, which I love and I like to do. So, but when it comes to picking out, you know, every single detail that goes into a bathroom from back or board to just all this information that we had to really get educated on. Uh on that's that's my first gut answer. But then I kind of always go back to listening to other people now as I'm as now I'm speaking to more and more people in the in the industry, like, oh yeah, it took us two years to remodel it. Like not even, not even stopping, you know, skipping a beat. And so I think it was a combination of my naivety about how long it would take. I did know my main concern about the contractors' numbers, not only were they high, but I was, I'm I had worked before where change orders can be detrimental to any budget. And I knew that given the level of detail that I was designing, that that's what we were gonna probably be facing. They weren't, you know, when you give a bid for a job that size, you're not necessarily, you know, you're not like, okay, what tile is she gonna use? Is she gonna go with large format or is she gonna go, yeah, yeah, right? I have this in my mind as a designer, but they're not thinking through that. So I think that we made the educated decision at that time that, you know, we were gonna be probably up against a lot of change orders and we decided to do it ourselves. So I don't know. I I I'm not sure if I've learned something, or I certainly don't think I would do it again that way.

Nathan St Cyr 45:06

Uh well, well, okay, so this is what I took, we've gone through two renovations of two different properties, historic, both of them are historic buildings. So we are we've gone through two now and we've learned a tremendous amount. And so what I'm hearing from you is that number one, um, as you go into a project that really drilling down into timing and commitments and project cost, it's it's it's difficult. It's difficult because to get somebody to give the attention to actually have the patience to go through and create a real bid that has, because if you don't have the details in there, then it's gonna be change orders. If you do have the details in there, the amount of upfront planning that needs to occur to get those details in there, it's time consuming upfront. And a lot of times, busy contractors and busy areas, they just don't want to deal with it. They're like, you're too much, you're a pain in my ass.

Kim Herrlein 46:14

And then they just they're like, she's gonna be a pain in the ass.

Nathan St Cyr 46:16

Yeah. So so I think that not taking this part of the, I mean, we just as we were underwriting a potential uh opportunity for us that we're we're close on, that's one of the things that that Mike said that we've really we've really learned from. He's like, look, man, we need to develop a plan, take the time, communicate up front clearly that in our due diligence, that we really drill down and get really concrete on what we're gonna do and what those costs are gonna be and what the timing is gonna be, because they have a dramatic swing in a they they dominoes into a lot of areas of the business, let's say that. So I think that that is absolutely imperative. And it's something that sometimes we just gloss over because we're excited to make the purchase, especially if it's a first-time purchase of a hotel, right? We're like, oh my god, oh, it'll we'll work. Yeah, that looks right, that looks good. We've had a couple people look at it and give assists, but but to take the extra time, dig in, and then know that it's probably gonna come in over budget and it's probably gonna take longer than you anticipate. That's awesome feedback. Well, well, what a what a journey, and I think that this conversation that we've had has been it's just when we look at the your background, the success that you've had, and then the journey that you've taken. I think it's similar to a a lot of us are in this this space. And to be able to learn from you some of those challenges, mistakes, your transparency, your leadership, how you're operating remotely, I think it's incredibly valuable to our listeners. So just want to thank you for uh providing a great episode.

Michael Russell 48:01

Thanks. I appreciate that. Thanks so much, Kim, for being on the show. Um, as always, thank you guys, listeners, for um for listening to this show. Uh, if you could please go ahead and rate and review us, it means a lot to us. Uh but Kim, if someone wants to stay in touch with you or get a hold of you, where can they reach you?

Kim Herrlein 48:19

I think my best way is through Link Tree. It's at Link period, what is it? Link T-R period E-E forward slash Kim Herline.

unknown 48:28

Okay.

Michael Russell 48:28

That'll have all my show notes. So if you're listening, uh you can just find it there. All right. Thanks so much. And aloha. Aloha.

Kim Herrlein 48:38

Aloha. Thanks, guys.