Lessons Learned from a Failed Motel Deal | Tanya Rooney E14

What happens when a hotel investment doesn't go as planned?

In this candid episode of the Hotel Investor Playbook, we chat with Tanya Rooney about the ups and downs of buying and operating a roadside motel. From discovering hidden challenges in partnerships and revenue projections to navigating the nuances of small-town hospitality, Tanya's story is packed with invaluable lessons.

You'll learn:

• How to spot red flags during underwriting and due diligence.
• The differences between short-term rental investing and hotel operations.
• Why partnerships are like marriages - and how to choose the right one.
• Actionable steps to prepare for success in hospitality investing.

Whether you're new to hotel investing or looking to avoid costly mistakes, this episode will give you insights and strategies to help you level up.

🎧 Listen now and uncover the ultimate hotel investing hack: learning from the mistakes others have made.

Connect with Tanya:
Instagram: @tanyamn
Website: Tanya Rooney
Podcast: Tribe Builders Podcast

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Transcript

Michael Russell 0:00

What happens when your investment doesn't go quite as planned? Most people hear about the wins in hotel investing, big payouts, charming properties, and endless potential. But the truth is, not every deal is smooth sailing. In today's episode, we're joined by Tanya Rooney, who shares the lessons she's learned from a challenging motel investment. From navigating partnerships to uncovering unexpected operational hurdles, Tanya's story is packed with insights that every aspiring hotel investor needs to hear. If you want to set yourself up for success and avoid common pitfalls, this is the episode for you. Let's dive in. Welcome to the Hotel Investor Playbook, your guide to building wealth and freedom through boutique hotel ownership. Hosted by Mike and Nate. Get in the game. On today's episode, we have Tanya Rooney. Tanya, welcome to the show.

Tanya Rooney 1:15

Hey guys, super excited to be here.

Michael Russell 1:18

Yeah. Yeah, I'm really pumped about this. So we were kind of talking shop offline beforehand, and I love your story. Now, this conversation is going to be maybe a little unconventional because what we're going to ask you is we're we're going to talk a little bit about your experience investing in a hotel, um, your partnership, and ultimately what went wrong. Because in this very moment, you're no longer an owner or partner in this hotel. And just true talk, we want to dig into that because I think that a lot of our listeners um have aspirations to get started, maybe very similar to you. Uh, they've got experience in short-term rentals and their goal is to scale up. And oftentimes we make it it does whether it's this is intentional or not, we make it seem like, oh, this is easy. Anyone can do it. You just follow these steps and you will, you know, hit payday uh with uh hotel investing riches. Well, it doesn't always work out the way you want. And so I think that uh today I really want to dig into this because what we can ultimately what we can get out of this conversation is lessons learned, right? Lessons learned when things don't go according to plan, because that's gonna make not only um you stronger, but yeah, I think our listeners will benefit from this. So let's hop into this, let's talk about this. You had a goal of purchasing a hotel, walk us through the situation and ultimately what transpired.

Tanya Rooney 2:47

Yes, thank you. But um, so in June of 2023, we made an offer on a hotel. We saw, like honestly, somebody just put it into a mastermind Facebook group that I was in. I live in Minnesota. The hotel is actually in Wisconsin. So I saw the pictures and I was like, hey, let's just go check this out. So we went over, checked it out. It's an 18-unit three-building motel, just roadside motel. Um, it wasn't in super, super rough shape. It wasn't, it's definitely not a five-star or anything like that, but it wasn't, it wasn't really disgusting. There wasn't, you know, drugs on the on the floor kind of situation, but it was, you know, it didn't have the greatest uh reviews on the internet. We'll say as a basic right? Yeah, totally basic roadside, you know, little town in Wisconsin on, you know, next to a really, really big lake. So it's got a lot of people coming to it. Like the market honestly is perfect for it. Like there's not a ton of hotels that are really near it. The town does a lot of, like, they have a really strong chamber of commerce, so they do a ton of things in the town. They have little festivals like all summer, 4th of July is huge. They do a big, huge ice festival in the wintertime where they do stuff on the lake, and people that aren't in Minnesota and Wisconsin think we're crazy. But um, yeah, we go on lakes with vehicles and stuff like that. So how are you?

Michael Russell 4:04

Describing real quick though, this this environment, this motel. Sorry to interrupt, but I I just I want to take a minute to explain. You're describing like what it epitomizes like the Nathan describes as approachable real estate or an affordable uh opportunity. Not all of us just walk in, you know, with tens of millions of dollars to go and buy some mega hotel on the beach in Miami, right? But you know, that doesn't necessarily have to prevent us from getting started. And so you're describing, hey, look, in somewhere in the Midwest, there are these hotels, in this case, just outside of Minneapolis, an hour outside of Minneapolis, you found and located a motel that had an opportunity, you identified it. Look, there's there's some features of this town, it's quaint, but this is um you know, this is an opportunity that is reasonably affordable that we can we can approach and we can get started in investing in hotels.

Nathan St Cyr 4:52

I want to totally I want to pack one thing on that though, because I think you said when you painted that picture, this gets missed a lot. So when you made the comment, they had a very strong chamber of commerce. Like, like that to me was like that. That was a that was a big statement. That was like, okay, we went in, we did our market research, we went to the community level, which I'm finding in a lot of these smaller properties that understanding the dynamic of the community is should go straight to the top of people's priority list when they're doing their their market research. Like, how does a community feel? What is this community about? And then if you can find an in to wow, this community is really gonna support this project, um, that's when you know you're onto something. So when you said that, oh, they have a really strong chamber of commerce, I was like, oh yeah, she did this right. She went in and and did the the right kind of market research. So um anyway, kudos on that.

Tanya Rooney 5:54

Yeah, you you I mean, that that part is really important. You you gotta know, like, there's there's motels everywhere. Holy Hannah, they're literally everywhere in every single little town. But if there is nothing going on in that tiny little town, there's not a lake. I mean, like I said, in the Midwest, there's gotta be a lake nearby. There's gotta be something that even bring people. If there's no trails to walk on, if it's literally just a dumpy little town with nothing, who's gonna go there? Are people building in the town? Do you have contractors coming in? Like those are the things that totally matter. So we kind of figured out, like, we wanted to go look at it. We took a look at it. Um, we put in an offer. It, I think we did some bantering back and forth and we got it under contract, and then we had a due diligence phase of a couple of months. And I canceled that contract like two or three times because I kept like underwriting and I honestly I did not know how we got this under contract. I was like, shit, I don't even know how to underwrite a deal like this because I have a short-term rental background. I used to flip houses. I've actually done commercial real estate project management for like 10 years. So I had like the pieces of the puzzle, but I was like, I do not know how to underwrite a motel. So I found like I started talking to my network. I'm like, hey, who can help me? I got linked up with a guy that has a mastermind. He helped me underwrite everything. I had, by the time I was done, I had 19 iterations of an underwriting, but like, you know, whole entire package. Because I'm like, oh my God, there's just so many things. Because in short-term rental land, we care about a lot of things. But man, in hotels, like there are different things. Like you actually do have to care how much money is that on-site person that's gonna be helping. Like, is there gonna be somebody at a front desk? You know, that's stuff that in short-term rentals we don't we don't care about. We don't think about who's gonna answer the phone because we don't get phone calls. But in hotels, uh, it's very different in motels, um, which we can get into later. Um, but we had an under contract, we did all of our due diligence, we kept running numbers. And I'm like, for the stuff that I wanted to do, because I had a vision, like we all go into something thinking we haven't a vision, and I couldn't figure out how to make the numbers match. And then there was no proof. Like they didn't necessarily have books that I could say, like, hey, this is how much money it's making, because it was underperforming at that time. They had bought it as underperforming, and then they did make some really great changes, but it just wasn't enough that was going to make people actually want to come there and like the customer service that matches and stuff. So we ended up canceling the contract, like I said, two or three times. And then so the deal was kind of like, okay, this is dead. That was probably September of 2023. And then fast forward a few months, like I made friends with the people that were selling it. There was it was a partnership, and I made friends with one of them because she was just in Chicago. Um, so not a super far drive. I had actually got to meet her a few times. We got along a lot because I mean, real estate, like I don't know, I love real estate people.

Michael Russell 8:34

Well, you're easy to talk to, so I'm sure that's that helped. Being personal and we're story, right? Being friendly, being personal goes a huge huge way.

Tanya Rooney 8:42

It does, yeah. And I so I made that connection. And then I I heard from her in like April. We were we were heading out on a trip, like we were into Greece for a few weeks or something. And she's like, hey, I'm gonna be in town checking on the motel. Do you want to come up? I was like, Yeah, let's let's it's only an hour drive. Let's just, you know, hang out and see how things are going. And I just really liked her. I was like, yeah, totally. So um she said at that meeting, she's like, Hey, like we're just having dinner. She's like, Do you if if I buy out my partner, would you come in, you know, would you come in and like make it into your thing and then buy it? And I was like, Yeah, I would be into a conversation like that. Um, so fast forward just another 30 short days, and she's like, Hey, um, I got the agreement in place. I'm buying out my partner, like um, you know, go do your thing kind of thing. So um, so we were able to like enter the deal at that point, and there was an agreement that we would come in as a partner, we would bring in some money, and then we'd bring in a lot of equity or like sweat, like sweat, like we we would do a lot of the work. And then we knew we were gonna be the operator. The gal that had it, she was money, um, ownership, you know, kept to the loan and stuff in her name and all of that. Um, but she was, you know, seven hours away. She didn't really want to operate it. She's really good at apartments. She's really good at like small multifamily. So she didn't want anything to do with like having to operate it because that's not her specialty. And I was like, cool, it's mine. Well, it it became mine. I learned how to do it. So we entered the deal and did like made changes. Um, we went through every single review we could find, even from the past owners before them, and figured out what's wrong with all these rooms, like what are people saying about them? We did like top to bottom, went to every single room, put plugged things in, like looked at layouts, looked at everything we possibly could, made lots of notes and then started making changes. We knew like anything that smelled weird, we needed to take care of what smells weird, or we need to close those rooms because people don't want to be in a room that smells weird, especially when you're rebranding. Um, so we rebranded, did a lot of that stuff. And then, you know, I don't know if you actually want me to get into the story of leaving it in December or not yet.

Michael Russell 10:44

Well, I just I just want to take a minute to acknowledge what you're going through. It I'm I'm laughing a little bit because look, when you buy a value add property like this, there's a lot of things that you just can't anticipate. Sure, you know, mathematically, you can punch numbers into a spreadsheet and you can make anything look amazing. But it isn't until you take ownership of that bad boy that you discover, well, what the heck is in the walls? Well, why does it smell in that room? Let's open that wall, let's find out. And so there's just there's a lot to learn that I think you're what you're describing here is ultimately leading to okay, lessons learned, right? And I think that's what we're drilling down to is like what are the lessons learned? Um, let's go back though, if I can. Um, because you just you just dished out a lot. Let's let's rewind to the negotiation part. I'd like to know, like when you were negotiating with the seller, um, there was there were two of them, right? Or did you say they were sisters?

Tanya Rooney 11:40

Uh no, they were just partners. One of them from Georgia, one's from Illinois.

Michael Russell 11:44

Okay. So they were out-of-state investors and they bought the. I think what I'd like to know is, well, why, from your recollection or from your understanding, why did they buy a hotel? They're they're multifamily people. They don't have a lot of experience in it. They're not anywhere near the property. Why did they buy this hotel to begin with?

Tanya Rooney 12:02

I think it was a mix of like it was a really good deal. It was like when they bought it, it was absolutely a good deal for 18 units. Um, you know, it's probably around 300 that they paid for, maybe even less. Um, but there was some, there were some things that happened there that they knew that they could handle. And then one of them was an operator. She has a whole portfolio of short-term rentals in Georgia. She already knows how to do this business. She was good at building the system that kind of was around it, like the VAs and stuff that could handle it. And then the other gal was, she partners with people. Honestly, the multifamily gal, she partners with people. She's she she's have she has a lot of successful uh partnerships with different businesses. And that was something that she did. She hops in and she's like, hey, these are the things I'm good at. Just let let's do this thing. So I think it was a good connection that she had and she wanted to give it a try.

Michael Russell 12:48

Okay. Let me give you some context to where I'm going with this because what I'm recognizing here a lot of times when people are underwriting deals, oftentimes they're assuming that they're gonna do things so differently that they're gonna make these improvements. And it's easy to do. Like, okay, if we put a little bit of money into this, we make this a little bit nicer, all of a sudden, you know, this property is gonna be profitable. And it doesn't always work out that way. And understanding of what were the intentions of the original owner and how did they execute is really critical because oftentimes I think that as buyers and optimists, we assume that our changes are gonna have much better results. I don't know that we give enough credit to the original sellers as if, you know, because there's obvious signs of deferred maintenance or they live out of state, or all these reasons that we can justify why they were unsuccessful. And that can kind of create noise in terms of um a combination of our own optimism and you know, trying to justify why they were, you know, unsuccessful. And so just getting some context of like, well, okay, ultimately this thing didn't work out. So let's let's, what are the lessons learned? Why, now that you have perspective with you know, flashing forward to current times, what what lens are you looking at now? If you could go back in time, what would you reevaluate during that due diligence period when you were considering getting involved with this? To maybe if you could have recognized, well, what are some of the things that maybe I would have looked at or concentrated on that would have I I could have identified that this property wasn't going to be able to bring in, let's say, the revenue that you needed, or you couldn't cut the cost because ultimately you're just driving NOI by either increasing revenue or cutting costs. What were some of those things now in retrospect that you can identify that you didn't know then?

Tanya Rooney 14:32

I would say um a lot of it had to do like there's two versions because there's the version of me that was uh trying to like do the deal myself in 2023, trying to buy it for five or six hundred thousand dollars and then put a couple hundred thousand dollars in it, and then kind of assuming that it would be a million-dollar property at the end. Um, so then the realistic version of what happened over the summer is okay, what does it look like to actually drive that revenue? What does it look like to even get to those numbers? Like you have to have some kind of form of consistency because when you enter a property that has been running, I don't care whose property it is, you have to shed whatever that skin was. Like it was, you know, like we'll just call it the 2023 property. It was this version. It had like we got phone calls from people saying, well, like what have you guys done that's even different? Like I see that you guys updated finishes, but does that mean, you know, does it if they had if they didn't have the greatest customer service or that's what the reviews were, the people that are coming into town that continuously come into town and use that facility, they're still going to assume that they'll like you have to beat all of those reviews. You have to like justify essentially what you're doing. So I think about some of the differences and what that looks like. And it's just you don't even know what you're getting into until you get it. And and I'm thinking about this in the form of like, I'm a short-term rental owner. I buy short-term rentals, I buy a house that I need to flip or a house that's already ready. I put furniture in, and here's my new short-term rental. It's got a brand new listing. This is where like you are starting from scratch in a way, because you're just like, here, this is this is our new really pretty rental. Here, come have fun. Hotels, they come with baggage. It's almost, I don't want to say it's a divorced person, but it's a divorced person. Like, I mean, like they come with some kind of baggage in some way, shape, or form, whether it's good or bad, it doesn't matter. You have to overcome all of those things when you enter whatever that deal is because people always like because there's we're talking about the community thing, you know, the chamber of commerce, they remember every iteration. They remember every time somebody buys it, what they do, they judge all of it, small towns, stuff like that. Like they know everything. So I think even knowing like those are going to be some of the hurdles you have to do, you have to prove yourself in a different way because this is a big, huge property that everybody knows it was this thing. And then the second thing, the biggest thing I think my lesson learned is about a partnership. It's about like being super clear and very, very open and honest, like right away. Like these are my expectations. What are your expectations? What am I gonna do? What are you gonna do? And then knowing how they're going to change. Um, I went in and I'm just like, I've got short-term rentals. Like, I can run this. I love running my short-term rentals. It's like one of my favorite things. I don't mind doing operations. But then this is a little bit heavier. Like it short-term rentals are very similar. The hospitality is still there, but you will have things that you never expected. Like my biggest unexpected thing was how many phone calls you get for a hotel. Because you're just like, my short-term rental doesn't get host, like we don't get it. And you go into a hotel and you're just or a motel and you're like, no, I'm gonna, I'm gonna listen on VRBO and Airbnb too and booking.com. So I'm not gonna get any phone calls. Well, phone call traffic is like some of the best traffic you'll get. You will uh automatically switch from like if you're really good at direct bookings, maybe you're 30% direct bookings in your short-term rental business, that's gonna flop. You are gonna be 30% Airbnb and VRBO or less. You are gonna get 70% of traffic from Google, like your website from your phone number, and then people literally just driving by. So that is a really big mindset shift of like it's a different way to get guests that you didn't know you were gonna have to deal with. And that phone actually has to be manned because people will be sitting outside. Hey, where's the office? You know, I want, I want a room. Like, hey, I want to give you cash. Like, you have to have answers to things that in short-term rental land, we don't we don't have to care about. And this is not bad stuff, it's just things that were really unexpected. Like we're talking about lessons learned. I'm just like, whoa, I did not expect to get yelled at by 80-year-old people constantly because they didn't want to give their credit card um to the website. They wanted to give it to a person. Just like stuff like that. So though like lessons learned, I think about that. And so, and the reason I brought up like those kinds of things, like the phone calls, is because I didn't expect that, you know, my portion of operations was already in my head flattened, like this is what I do for Airbnbs, it's gonna be fine. It's uh it's gonna be a little bit more work because obviously it's 18 doors versus you know five, but but it's different because uh there's resentment can happen really, really fast because you're working a lot harder on these things. So I think being really clear or having a partner that you guys are just in sync. Like if somebody gave me an example of like, well, their partner, two partners, one of them's grandma was sick or mom was sick. So he had to exit for like six months because literally hospice care, like all the things, had to help with his family. Well, is the other partner going to pick up the slack or not? Like, that's probably the easiest thing for me to now say is like if you're going into a partnership, if somebody gets sick, who's going to pick up the slack? Is the partner going to pick up the slack? Do you have the team? You have to get good at having teams, anyways, if you're gonna be in a hotel motel space, uh, because it's just inevitable, you just can't do all the things, not the same way. So, is your team gonna pick up that slack or is the other partner gonna pick up that slack? So, just knowing like who you're going into business with, that's like my biggest lesson learned is a partnership is a marriage. And I already thought that, but now I really Understand it afterwards. So I feel like I might have answered your question. I'm sorry, Mike.

Michael Russell 20:06

Yeah, no, you you'd be great. I think what what just to kind of sum it up, you you were surprised by there's marketing um components that are different than short-term rental operating, right? There's you need to understand your guest avatar and how to attract them. And um you also were surprised by the differences in operations. And that a lot of times I think the allure of scaling up into um hotels is well, look, if I'm already doing short-term rentals, this is just a short-term rental, just bigger. And I'm I'm you know, I'm qualified, I can do this, but it's not, it's a different animal. And it can require a higher level of operational management. And what the resentment piece I think was important because that that struck that that really hit a cord because if you are constantly working in the business, the idea of being a hotel investor then is no longer accurate. You are now just self-employed. You are working, you have a job. Yeah, you got a job.

Tanya Rooney 21:05

You buy yourself a job, and it's way less money than anything. It's like a dollar an hour, maybe 25 cents an hour because you're there so much and you worry about it in a different way.

Michael Russell 21:15

The last thing that you spread in there that that really struck a chord with me was expectations. So, whether that's expectations with a partnership or even within your organization, I think that having a clear understanding of roles and responsibilities, we did a podcast episode previously. We went through our organizational um accountability chart. And Nathan is really good at reminding me that I need to remove myself from those roles. And although in the beginning, let's be honest, sometimes you just have to roll up your sleeves and dig in. Um, if you identify the path by having clear expectations of what it's gonna take to be able to achieve um removing yourself, like, okay, if I'm gonna have to hire personnel, then what is the expectation of when I can do that? I feel like that'll diminish some of the resentment that you feel you felt, but back to square one when underwriting a deal, the part that I'm curious about is um understanding and having a clear expectation for revenue projections, right? Because ultimately, if you make enough money, you can then pay for the personnel to remove yourself from the position. And so can you touch upon like what happened? You talked about expecting like if I hit A B C steps, this thing's gonna be worse, X, Y, Z. Um, can you walk us through revenue uh expectations and where ultimately you fell short?

Tanya Rooney 22:47

Yes. And you just saying that reminded me of the things that I like failed at. And it's so beautiful because honestly, I think of failure as like you're just learning lessons. Like if you want to put the you know title of failure on, totally fine. It's up to the person. But I realized I did a lot of work this summer of 2023 trying to figure out how is this deal gonna work. Um, we put in a ton of stuff in there. Like, you know, it was there was a maintenance person, there was, you know, I don't think there was a front desk staff or anything like that, but cleaners, like all of those things. But then when I fast forward to April and May, when I actually started helping out, it was kind of like, hey, we don't have a ton of money to make changes because we didn't. It was whatever I wanted to bring in to make changes on. And I was like, okay, let's just figure out how we can get it to start making money because because they had like a Q1 of let's just say, you know, they made a couple thousand dollars in Q1. And that's not, that's that's definitely not enough. Like you need to at least be covering its bills. And so I think realizing that a lot of that underwriting went out the window, and I should have revisited all of that and been like, hey, these are the expectations, but going into something that you don't know how much money it makes because you don't even know its potential, like as it sits, because it's whether or not somebody's managing it. And so I think going back into like even the even thinking of it is I didn't take enough of that into consideration to actually have a discussion. I was really excited. I get really excited. I am 100% an emotional like person. And the fact that I make emotional decisions and I'm getting better at it now, especially after this. But it was more of like, I was really excited to work with that partner. That was a hundred percent why I said yes to begin with, was like, or that I was even considering it, is because I wanted to work with somebody whose mind worked so different than mine. Like she has like a macroeconomics degree. Like she literally thinks about real estate differently than me because I get excited about certain things and I love hospitality and all this stuff. But she has this background that I'm just like, it's like a foreign thing for me. So I wanted to be exposed to a person like that. That was like one of the main reasons I got into the deal is I was like, this is gonna be fun. Like, I'm gonna learn some stuff no matter what. I get to rebrand it and make it into this really cool space. So there's a story there that I like.

Michael Russell 25:06

And again, yeah, but I want to take a minute here. I just I want to interrupt you for a second because what you're describing here, I think, is you came up with a creative solution, right? And so from a risk perspective, you were risking your time and your life force, but from a financial perspective, there was relatively little risk. And I think that is an important lesson because um you could take on that risk and then have relatively little consequence. Um so what you've gained from that experience, though, and I want to talk a little bit about the wins. When I look at the website and we were talking offline about this, I said, wow, this place looks beautiful. Like from a marketing perspective, if I were looking at visiting this lake area outside of Minneapolis and I was browsing um of comparable motels, this one really stands out because the way that it was um the decor, right? The the photography. So I don't know anything about what the previous place looked like, but if from fresh eyes, like it looked really clean. It looked, uh, it does look really clean, really well put together. It looks um like the remodel, the decor is great. And so that takes that takes some effort and some skill set. And you can see that your short-term rental experience applied. So this wasn't all just gloom and doom. You went into a project, you didn't have to invest anything financially, but you invested your time, you learned a shit ton. And now going back to okay, well, what are the lessons learned here? Um, I think I'm recognizing here you partnered with someone that had uh a level of experience in an area that you didn't have yet, and you recognized, like, okay, um, I need to learn a few more things, and particularly when it comes to potentially underwriting revenue potential. So that was kind of where the question, that was a genesis of like the original question was hey, now if you were to do this over again, how would you identify? What were what would be some of the things that you would do to identify? Like, is this hotel going to be profitable or not? Are there any like specific tactics if you were to um revisit an opportunity like this? You know, we talked about the uh what do you call it, the chamber of commerce, or maybe it's doing some research on comparable ADRs. Have you learned, are there any lessons learned in terms of identifying revenue potential that this experience has given you?

Tanya Rooney 27:37

Yeah, I think it would be conversations outside of the computer, because I, and that's just the way that like I function, anyways. I had help, I had people help me underwrite this at a couple of different stages. Um, and people are like, well, just add a hot tub. I'm like, this isn't a short-term rental, it's not the same. Um, but I think it's having, I would, I personally would actually go to a chamber of commerce meeting if I'm gonna buy a property, if I'm gonna spend half a million, million, three million dollars, I want to know what the market's like. And you're right, you said earlier that there's certain places, it's like not everybody has $10 million to go to Miami or to go to Utah and buy like this big, huge property that's already got a track record. So if you're gonna start where somewhere small, you got to know like what does that community look like and what's the vibe? You can go to one chamber meeting, you'll get a vibe, I promise. Because especially small towns, I don't know. I think they, I think they tell it. Um, so I would probably go and check in and literally go to a couple other small business owners in that town and be like, hey, what does it look like? Like, do you guys have festivals? Like, truly not what the computer is saying. Because just because Air DNA, just because CoStar, um, just because all those places say this is what the revenue is gonna be, you have to do whatever you have to do because every single day you do not have sold is perishable fruit. You will never get that $100 back. You will never get that $200 back that didn't get sold. And if you don't know stuff like that, and and that's all because I learned it from doing like I didn't learn this in a course. I was just like, well, we're gonna give it a try. So I think having conversations locally of what it looks like, because what does it look like in the wintertime? Like in Wisconsin and Minnesota, you have to have snow to make money. We had a really crappy year last year. There was like three snows. So they had to cancel most of the festivals. So do you have the money to make up for it? And then there's some markets that literally close for certain seasons, which is completely fine, but it's actually running the numbers, what that zone looked like, and then being realistic about your numbers and your vacancy because it took a little bit for people to find out. Just because, like, we put a big sign up under new management, we rebranded, we started talking. We like we went to, we literally did festival stuff. We worked in the in the stands and stuff to help. And it took a little bit for people to start realizing that it changed hands and that it there wasn't a three-day minimum or a seven-day minimum anymore because some of that stuff was happening too. Because in short-term rental, and you can do stuff like that. But in here, yeah, I totally want to sell a whole weekend. But sometimes, like we just have a trucker whose truck broke down and he needs a room, and we want to sell him a room too, because I'll never get that $100 back because that perishable fruit situation. So I think it's learning like what's happening in the market. And I personally, I'm just more of an experiential person. Like I would have to go to that market and actually walk around and spend a week there because I don't know how to figure out the vibe off of analytics.

Michael Russell 30:31

What you're basically describing is when you're gonna go and let look at investing in a hotel, um, there is no replacement for experience. Absolutely. You need experience, right? But if you don't have experience, well then what? I mean, ideally, you've done this before, you've gone through this, you know the market, you know you you've been investing and you just understand, like, okay, if I do X, Y, Z, this is gonna, this is gonna perform. But coming from, you know, in your perspective, like, okay, if you don't have the experience, the other thing that you said in this conversation was you alluded to partnership. And I think that's a critical component from a lesson learned, right? If you don't personally have the experience, who can you find that does have the experience? And maybe they've got experience in an area of underwriting, for example, that is more of a strong suit for them. And then, you know, I can tell right off your strong suit is is people, yes, and I could tell operationally speaking, like from what I saw from the website and and your role in in doing that, you've got you've got great skill sets right there. So, where can you, you know, if we reflect on this, okay, goal setting, I want to go and I want to buy a hotel and I'm all by myself and I want to do this, how do I do it? If you're gonna go and partner, how can someone go and find a partner? What have you learned if you were to do this over again? How would you go and find the right partners to make sure that the next endeavor uh performs?

Tanya Rooney 31:56

I would say finding people that are as excited as you. And it doesn't mean a numbers nerd can't be excited about things because I think of like somebody I would want to partner with, maybe a numbers nerd and then maybe uh maybe a designer. I don't know. But I think thinking of those kinds of people and then being excited about a project because it might take you six months. It might take you a year to find a project. Do you have like the person that you're partnering with? Did they have, did they want to do that too? Because I know P I know a guy right now who's made 600 offers, like in the last like four months. He hasn't gotten a deal yet. Um, so I think the resilient pieces are is a really big one that you've got to like who who can sit with you and do that kind of stuff. And then um, like knowing knowing what the personality traits are. Like I actually do kind of function with um uh culture index, predictive index, like things like that. Like these things, there's tools out there. It's kind of like Enneagrams or you know, strength finders, like actually finding out what somebody's personality is and how does it link with you? Because you are when you start that project, you have no idea what kind of person that is unless you grew up with yeah.

Michael Russell 33:05

But how do you find these people though? This is what I'm drilling down here.

Tanya Rooney 33:09

You would go where they hang out, which is hotel groups. Like honestly, you would go to a real estate meetup, you would go to a mastermind that's for hotel people, and you would literally say, Who wants to do this? Who wants to chase with me? Because the people that show up to those rooms are the ones that want the they want it. It's not just somebody on the internet saying, like, I really want this, and I posted it in a Facebook group twice. It's the people that are going to, you know, if you take hotel con or going to the glamping, you know, hook con. I don't know what it's called. I'm sorry. Um, but like it's people going to that because those are the people that are actually putting in the effort. They're already putting money in to even show up to be around people like you, like you two. I'm sure you guys go to meetups of some kind. I would want to find out what rooms are you guys hanging out in. And now, how do I go to those rooms? Like, when is the next conference that they're going to be in the room? And then you just start talking because people that are hanging out with each other, well, they're the ones who want the stuff, you know, like you go find it.

Michael Russell 34:05

Which I think is really important. And if you can learn by doing whether you partner by, you know, getting together with people to raise money or you just joint venture with people that have money. I think ultimately drilling down to is identifying, well, what can you do? How can you get started? And you're you're living proof of that example. I'd like to know what's next for you. Like, where are you now? You you're no longer involved in this hotel. You guys had a disagreement of sorts, you said, look, this isn't gonna work for me. We're not hitting the revenue projections. Uh, I don't anticipate myself being able to purchase this hotel because we're not hitting the revenue expectations. So you exited that situation. But looking at your experience now, moving forward, 2025, what's next for you? What's in your vision? Are you are you expecting, hey, I'm gonna continue to pursue to purchase hotels or what what what's that in your what are your plans?

Tanya Rooney 34:58

I've got a couple of people talking to me about hotel stuff that if I found the right partnership, I would be in. Like I I I think of a team, like a really fun team that it's like everybody kind of does their piece that they're excited about and they're excited about the project and the prospect of changing like a whole entire community because of this project. I think like I'm I'm waiting for a situation that makes me say, hell yeah, like I want to be in on that. And then the rest of it, like, I think there probably is a hotel in our future because my husband really wants one and he would really like to be able to work on one. But right now we're not actively looking for it. But it seems to me like I know this better than anybody, is that things just kind of come around when it is the right time. So I feel like things just kind of start coming around when they're supposed to, because I believe in the universe personally. So I think whatever is supposed to be next is just gonna be like, hey, you know, it's gonna knock on the door and I'm just gonna decide, yeah, that's a hell yeah, or no, no, no, don't want nothing to do with this because of this, this, this red flag. Um, so yeah, that's like a convoluted way of saying, I don't know, Mike. Just go with the flow.

Nathan St Cyr 36:05

I do want to jump in really quickly. I've I I wrote down a couple of things because this whole concept here is about lessons learned, right? And I'm seeing some parallels in your story that I see consistently. Um, I I'm in a community where I'm the hospitality um asset class expert. And so a lot of the a lot of the crew that uh has a passion to go and purchase hotels, they'll use me as you know, somebody to review their underwriting and and what have you. So I'm seeing a lot of these reps of people bringing me these opportunities. And there's two areas that that you pointed out that I think are there's solutions to. There's there's lessons learned, but there's solutions to. The first one was you said all the research I did was on the computer. Right. So if we go back and look at it and it's like, okay, would you have paid $10,000 and then had all of that time and experience back if you just paid $10,000? And I think a lot of times the answer is, well, no, because I got the experience. But from a financial standpoint, if you could say, all right, well, how much is my time worth? What you probably would have learned, you could have, because you didn't have the experience yourself, you could have hired a property manager to do the due diligence consultation work with you. Right? Yeah. It's it's 10 grand. Like we had Brian uh Tubao on our podcast, and it's like, okay, well, there's a fee, and then if you end up using them, it gets deducted from the management fee. But man, one of the things that they do is they're not gonna just research on the computer, and this is this is another lesson. They're gonna go into that market and they're gonna talk, they're gonna go to that chamber of commerce, they're gonna go to any of the other hotels and motels, they're gonna find out how much traffic actually is coming through, they're gonna have access and experience, they have a hundred years worth of experience behind them to go, okay, here's the challenges. And that brings me to the second part. Because when you underwrote this, and you guys touched on this earlier, and I think that this is so common. People look at something and they uh when they're when maybe we're we don't have as much experience, and we're like, well, here's where the opportunity is. There's so much opportunity because, oh, this place is crappy. And if I go and make it nicer, right, if I just go and give it a cosmetic makeover and put some cool design and we're gonna have great customer service, then it's gonna equate to this amount of revenue. And they make this assumption that by doing these physical changes, that all of a sudden there's gonna be more revenue electrons, that there's magic in that. And that's this is the part where there's the art of really understanding when I underwrite this, I have to be extremely clear on why the changes I'm going to make are gonna deliver those results. Because you know, you go and change ADR by $10 on your underwriting and occupancy by 10%, and it has a massive impact on revenue. But then when you're in the game to go and increase ADR and 10% and occupancy 10% to do that, all of a sudden you're like, oh shit. Well, what I didn't realize is really that there's really not that many people that are ever going to come here that will fill the occupancy and ADR that I'm looking to generate. The clientele that comes here will never pay the additional $10. They'll go freaking stop somewhere else along the highway. So I just I think that being really, really clear in What that end average daily rate and occupancy, what revenue you feel like it's going to deliver, um, that you're you get consultation when you're in the beginning. You really understand what it's gonna take to get there. And then in your due diligence phase, you actually get into that market and and get out there and talk to anyone and everyone you can and not just do the research on the computer. So those two things are very, very common mistakes that I see consistently when people are in the new. They just have this idea that things are gonna kind of add.

Tanya Rooney 40:36

Yeah, yeah. Well, and actually going into those markets and staying in those hotels, stay, stay at the hotel you want to buy, like see what their whole process is like. Stay at the hotel across the lake, stay at the hotel 20 minutes away every single night, stay in a different hotel and see what you're up against. Because I, I'll be honest, I didn't even think about hiring a freaking property manager to like help underwrite. Like, what a great idea. And this is, I think this is the that green spot that like I come from short-term mentals. I learned all this myself. Like, I built this, you know, here's my bucket of all the stuff I built. Knowing that there are people that literally go to school for this, they know how to underwrite, they know how to do this, they know how to work the front desk because they went to school for hospitality. Then there's all of us that are just like, well, I flipped houses, I can figure this shit out. And it is so cool because we have that, but we have the attitudes that we're like, yeah, that's not gonna stop me. We're gonna keep going in a different way than somebody that's just handed it or went to school for it. Or those people that went to school for it, they would never imagine owning the hotel. They want to work for the damn hotels. They want to work for the flagships, and we're just like, oh my god, F that. Like, I don't want to work for a flagship. I want to own my own damn flagship. So I think that's like the interesting thing of like marrying these things because there's things that we don't think about. And that's why getting around people like you guys, honestly, like Blake, like you have to be around people that have at least something. Otherwise, you are just buying yourself a job. You are gonna move to that hotel and you are going to run that hotel. And it's some people that's what it's for, and they love it. But if you want to like scale it up, you have to get around people that can tell you things like when no to start to hire a property manager to go walk it. Jesus.

Nathan St Cyr 42:12

Well, but what we're just I mean, we might be one step ahead, but we're just learning all of this. Man, that's the that's the beauty of being and surrounding yourself with people that are in it. Like you said, right? Having communities, having coaches, having resources is like we didn't, I didn't know that. I didn't know that that wasn't even an option. Now we're coming from the entrepreneurial. But you know, that is one thing that Mike has done really well in helping us build our company is that he recognizes, okay, you know, where are we vulnerable? What are our weaknesses? And then let's go and pay. And we used to use this as a justification all the time. We'd be like, okay, well, if we were getting our doctorate, how much would that cost?

Tanya Rooney 42:57

Yeah, a semester in college. Yes.

Nathan St Cyr 43:00

Getting a doctorate cost hundreds of thousands of dollars, right? So it's like, okay, well, why don't we just invest some of that doctorate money and go invest in experts that will actually get us to the level where now we have the knowledge of a doctorate. And so we kind of looked at it as an it's not throwing money away, it's actually spending money wisely, even though it is a cost and an expense.

Tanya Rooney 43:26

Well, even um, even that the like the time where I I had it under contract, I lost money. I technically lost money. Like I had to um give up my EMD because I canceled it so many times. Totally fine. I had to get uh an inspection because I don't know what to look for in a motel. You know, like am I gonna spend 12 hours, 16 hours there going through every room? No, I paid for an inspection. I had to pay for, you know, an appraisal, I had to do that stuff. And I thought about it afterwards and I'm just like, yeah, we lost money, but I hate that sentence because no, I didn't. Are you kidding? That was cheaper than a semester in college for the shit that I learned. Are you kidding? Like, I learned so much just underwriting it. And then this summer, the worst that could happen is I lose the money that I either put in or the time. And yeah, it was a lot of time. I was there a lot. Me and my husband woke up breathing motel. We slept at the motel, like we all of it, but that experience doesn't get taken away. Like, I it's it's like a semester in college that I was just like, no, it's totally worth it because I can use that knowledge everywhere now. It doesn't just because it was underwriting a hotel doesn't mean it's not about underwriting a data center, underwriting a commercial industrial building. It it doesn't matter, like at all, it's transferable.

Nathan St Cyr 44:40

Yeah. Well, look, I just think just the insight that you've brought and just to be able to just have have the open conversation and then the attitude that goes with it of exactly what you just said is like it's not lost, and you can label anything what you want, you can label it failure, or you can label it lesson, whatever however you want to label it, you're progressing. And I freaking that's like that is the name of this game, is like, hey, we're getting better one way or the other, right? It is if if we label it that, if we know and if we understand and if we have the right mindset and attitude, uh exactly. So I'm freaking, I think you've just delivered massive value to us and to our listeners.

Tanya Rooney 45:23

Yeah, just give it a try.

Michael Russell 45:25

Just give it a try. This was lessons learned gold. I I think it's all about perspective, right? Whenever you know you uh miss an objective, it's how you respond to it. And if you look at it like, oh, well, that was that was terrible because XYZ didn't happen, but or hey, I just gained so much. And I think that you've got a great positive attitude. Um, I know, Tanya, that you've got a community that you're building, and I know you're active on social media. If our listeners want to stay in touch with you, where can they get a hold of you?

Tanya Rooney 45:56

Yeah, easiest place is definitely Instagram. So I'm Tanya Rooney M N, and my first name is T-A-N-Y, um, and MN at the end from Minnesota. Um, that's probably the easiest spot is to slide into DMs and say hello. Um, I have like a website with coaching and stuff. We help people get set up on Airbnbs and start some other coaching too. And then I have a podcast where I talk about tribe building and why it's so important to our businesses. Like you guys are a really, really great example of like you have to build this business because you don't, you don't know what the heck's gonna happen. Once you get, I mean, the size of the portfolio that you guys have, there's literally no way you could do that, just the two of you. Like between employees and then the people that advise you. I I mean, there's just you just can't like you want if anybody listening wants to be a millionaire, billionaire, whatever the hell it is, you can't do that shit alone. I don't care who you are, like Bezos didn't do it alone, jobs didn't do it alone, so don't think you should either. So that's the kind of stuff that I get excited about. Really, really jazz.

Michael Russell 46:52

Or who not how I love it. Yeah, love it. All right, well, Tanya, this has been a great episode. Thanks so much for being on the show. Um, as always, listeners, thank you for listening. If you've enjoyed this show, please rate, follow, share, do all of that stuff. Um, it helps us so that we can continue to offer great episodes and have fantastic guests on our show. Mike and Nate here signing off with another episode of the Hotel Investor Playbook, and we'll catch you next time. Aloha,