The Beginner's Guide To Building Wealth In Hospitality | Jonathan Mueller E43

Think you need a perfect plan to start investing in hospitality? Think again.

In this episode, we sit down with Jonathan Mueller, an everyday investor who went from zero experience and a failed multifamily deal to buying a $250K roadside motel and building a growing hospitality portfolio. He didn’t have a background in hotels, didn’t have much of a strategy, and still made it work through pure action, problem-solving, and a willingness to pivot.

You’ll learn:

• Why taking action beats waiting for the “perfect” plan
• How Jonathan raised $300K in 72 hours to close his RV park deal
• The pros and cons of buying motels vs RV parks as a beginner
• What to look for in seller financing and SBA loan terms
• Why chasing “shiny objects” can actually help you find your path

Whether you’re just getting started or stuck overthinking your first deal, this episode shows how to take imperfect action and learn as you go.

Follow and share the Hotel Investor Playbook so more people can learn how to invest in hospitality assets the right way.

About Jonathan:

Jonathan Mueller is a real estate investor and hospitality entrepreneur transforming neglected motels and campgrounds into vibrant community destinations. Alongside his family, he owns and operates two renovated motels and a 70-acre RV park, Camp Forest Haven, blending hands-on renovation with a guest-first approach. His journey from spotting opportunities on a casual drive to scaling multiple hospitality assets offers actionable lessons in sweat equity, creative repositioning, and building community-focused spaces that truly stand out.

Connect with Jonathan:

Website: https://campforesthaven.com/

Instagram: @mister_mox  and @camp.forest.haven

Connect with Michael on Instagram or LinkedIn.

Email Us at info@hotelinvestorplaybook.com

Visit the Hotel Investor Playbook Instagram

Invest with Malama Capital

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Transcript

Michael Russell 0:00

What if the deal that falls apart is the best thing that ever happened to you? Many people get stuck after a failed deal, but Jonathan Mueller used it as fuel. One minute he was walking away from a moldy multifamily property in rural Michigan. And the next, he had a roadside motel under contract. In this episode, we talk about the leap from multifamily to motels, the messy reality of building a family business from scratch, and how Jonathan went from house hacking motels to operating a 70-acre RV park. He breaks down the creative financing he used to close the deal, what he's learned about managing staff and seasonality, and why hospitality is anything but passive. If you're building in hospitality, just remember the destination is sometimes the journey. You never know where you'll land, and that's what makes it so exciting. 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 this podcast, we talk story about everything you need to know to make money investing in hotels and hospitality assets. On today's episode, we have Jonathan Mueller. Jonathan, welcome to the show.

Jonathan Mueller 1:33

Thanks for having me, guys. Excited to be here.

Michael Russell 1:37

So, Jonathan, so you've got one of the more unconventional origin stories in hospitality, right? I think you worked on oil rigs, some you got like you had a broken back, and somehow now you're working in campgrounds. So before we get into the tactical stuff, take us back to this drive that you had in Michigan. You were kind of stewing on a failed multifamily deal, and you took a drive to get some stress relief on this road trip that led you to buying your first motel. So walk us through that.

Jonathan Mueller 2:04

Yeah. So I wanted to buy a cheap multifamily property. We found one in the middle of nowhere of Michigan. Went under contract, went out there for an inspection, black mold everywhere, had to cancel, went on a drive later that day. We drove past a roadside motel that had a for sale sign in the yard. The wife told me to pull over and let's take a look. And the next day before our flight out of town, we had signed a contract and bought a nine-unit motel in Menominee, Michigan.

Nathan St Cyr 2:35

Okay, but this is okay, but this is really, really, really important. And it's really important, like it's really important to me. So I just I have so many of these conversations with people that have their idea, right? They're they have their idea of what they can see what they want to accomplish. And then there's the ones that actually take action. And the percentage that actually take action is very small. So I just want to know what is it about your specific story that allows you to take that action where other people consistently freeze?

Jonathan Mueller 3:13

My whole life, I think I've been a bit of a risk taker. I uh enjoy extreme sports. Uh, you mentioned I uh broke my back snowboarding a few years ago. Uh I've always been a risk taker. I think I get that from my parents. And uh I found a partner in my life that is also an enabler of risk taking. She's always been involved in hospitality. And we didn't think of this as a per se a hospitality play, but a step towards wealth building. And without action, how much fun can life be? So we're all about taking chances, and they're not always great ideas, but usually we're we think of ourselves as being young enough and zillient enough to take the risks and knowing that we can probably work ourselves out of it if even if it's a bad idea.

Nathan St Cyr 3:57

Okay, so I love this. And there's two things that I I want to I want to dive into a little bit here, but I've been getting this consistent now that we're having more of these conversations. There's this consistent thing that keeps coming up, and it applies to me because I am a parent. But you said that you think you got that from your parents. Can you go a little deeper into that? I want to understand that more. What does that mean?

Jonathan Mueller 4:23

Yeah, so my parents are great people, just like everybody else's parents for the most part, but they are risk takers in their own way. When I was a little kid, they decided they wanted to be missionaries and moved us to Costa Rica for a few years. That's definitely not a risk-averse move. Back then, there were no cell phones. The phone lines were dead when we got to Costa Rica. So we couldn't even tell people in the US that we had made it for like three days. They turned out to be real estate investors later in life. And so I got some knowledge from them, but didn't really consider that path for myself until later on. And then they've always just kind of let us, they've directed us in our life, but me and my brother, but kind of let us do our own thing and figure out things for ourselves. And I feel like because of that, it led to us taking more risk in life than we might otherwise do.

Nathan St Cyr 5:15

Yeah. And where you're saying taking risk, I'm gonna say take action because I've looked at some of the things that you've done and there's risk mitigation in there. But the second part of this that's so cool is that now I'm seeing, like when you connected with me on Instagram, the thing that really I was so drawn to was that you're doing this and building this. And we'll go into that, what you're building out, but it was with you and your daughters. And I'm a girl dad. And so now I'm watching you. Your daughters are a part of this experience. So here was your parents, now it's you, and you're doing the same thing. And that just that fires me up. So, so walk me through your thought process of involving your daughters in this process.

Jonathan Mueller 5:58

Yeah, for better or worse, we have made these family projects. When we bought our second motel, it was just me, my wife, and our two-year-old daughter at the time. And we moved, you know, I back then I was saying we had house hacked a motel. So there was a manager apartment on site there. Our financing didn't come through for three weeks from when it was supposed to. So I lived in a motel room with my wife, my two-year-old, and our dog. Fast forward six months after that, my two-year-old was greeting guests at the front door and handing them their physical keys back when we did that before we switched to other types of locks. But this has really given us an opportunity to spend more time as a family, often off and on, because one thing that's not so nice sometimes is I'd take my girls to the playground at the RV park, but somebody needs me to deliver a bundle of firewood, or there was a clogged toilet at the motel when I was supposed to have dinner with my family. That knife cuts both ways. But to be able to involve my girls with me in this business has just been a true blessing.

Nathan St Cyr 7:06

Well, I love that. And I'm just for any of the audience that's out there that has kids that's listening to this, I highly suggest going to, and we'll put it in the show notes later, Jonathan's Instagram, because it is really cool watching the experience that these girls are having as he builds this company out. It's I think that it's really inspiring. So appreciate it. Yep.

Michael Russell 7:30

There's a lot in what you just rolled out that is extremely relatable. And I'm like, okay, there's these terms that people use in this business, like house hacking, right? And you were hotel hacking, and to an extent, you you've followed this kind of buy and repair and refinance and whatever the bird technique is. So you're bootstrapping this business. You've gone from an eight unit to a 23-unit motel, now a 70-acre RV park. So I want to go through this sequence to start in your mind. How in the heck did you just decide? Okay, let's go buy this motel. Like you were pouring into a completely different asset class. You were looking like most people at multifamily because that is a step to scale. And you said it was painful. We discovered in the due diligence process something that would make this um unobtainable. We had to pull out. Man, when you pour into a purchase and you go through the process of investing in not just the financial investment, but the time and the commitment to go and buy something, and then it doesn't work out, like how that feels in your gut, it doesn't matter how successful you are in life. Like, that's a failure. You're like, oh, it didn't work. I poured time, energy, potentially money into this. I want you to sit in that moment and walk us through like what you were feeling at that point in time when that transaction failed. You immediately pivoted into a motel and took instant action. Like, walk us through that sequence.

Jonathan Mueller 8:57

Yeah, you're right. And we were buying out of state. So all the pictures in the world can't really give you the full picture. So we were buying an asset out of state. We had flown in for this inspection. I was in the crawl space and in the attic with the inspector, and it was black mold everywhere. And it's heart-wrenching because we're staying out in Airbnb. We had bought flights out there, we had a rental car, like the inspector wasn't cheap. And we had told all our friends, oh, we're going to buy a 10-unit apartment complex, like this is where we're going. And instead, we're sitting there feeling really distraught, really frustrated at the whole thing. And then just going on this drive, just to let out some steam, so we weren't having to think about it, sitting in our Airbnb. We stumbled upon this motel. The manager took us around. Each unit was so this wasn't a true motel in the fact that it was doing nightly rentals. They were more of a medium, medium stay type of a place. So weekly and monthly rentals. And so that probably made the transition to hospitality a little bit easier because we were thinking of on a monthly or 12-month basis on the multifamily. And here's a motel, but not truly a motel. And so they were getting $150 a week per unit. Well, that's $600 a month. Well, these apartment units that we were looking at were all efficiencies, and they were getting rented for $400 a month. And the light bulb just goes on, and you're like, wait, this is kind of like a multifamily because I'm not having to do with cleaning sheets every day. But, you know, it's a lot higher ROI because there's not a lease in place, the units are furnished. So it seemed like a great deal at the time because you look at how much this place can rake in versus that apartment unit just down the road.

Michael Russell 10:57

It's crazy how sometimes like you don't know what course in life you're gonna take. You just take action. And the fact is, you had to take action to go and pull the trigger on the multifamily unit. Then you had to deal with the I'm gonna say for myself, not for you, but it's sort of embarrassing when you tell people you're gonna do something and then it doesn't happen. You had to deal with that, that, that pain, but you didn't you didn't let that affect you. Like hats off to you. I commend you because this is the true spirit of entrepreneurialism. It's messy and sometimes you stumble, and then what happens is you end up pivoting in a completely different direction. I mean, you started with this little motel that you did not intend to get into multifamily, and now you have this thriving 70-acre RV park that is, I mean, which it's incredible, the community that you're building. So, like that is this trajectory. I just I wanted to acknowledge your origin story because so many people that are waiting to get started feel like they got to have it all figured out. And the reality is you just take action, and that action is gonna lead to a reaction, and then from there you're gonna build some momentum, and it's this thing is just gonna get built out. And you had the courage to say, All right, dust myself off and pull the trigger, not just sit in analysis paralysis and wonder whether or not this is feasible. You said, probably, I don't have all the answers, but I'm gonna go and do this. You pulled the trigger, one thing led to another, and now you're sitting on our podcast because you have a story to tell about actionable things that you've done. So, bravo.

Nathan St Cyr 12:21

Yeah, and Jonathan, I'm freaking so this is so crazy because from an alignment standpoint, we're in the same path. Like we didn't happen into hospitality because we had at the moment this passion to say, we're gonna go and create this hospitality empire. Now we're on our way to doing so, but it started with us looking at the multifamily asset class to go and grow wealth, and we saw an opportunity and we went, Whoa, there's an opportunity here. And then we went all in, just like you've gone all in. And I just these types of stories inspire me because you listened to what you felt, and then also the pivot from uh you're like the margins. I was looking at how much we could rake in by this thing versus that damn multifamily, and and we are in, we're in agreement there. It we saw the same thing, so hats off.

Jonathan Mueller 13:14

Yeah, and I'll just put one more thing out there for those that are hospitality curious. There are these little roadside motels everywhere. I mean, I'm in the Midwest right now, but they're all over the West, they're all over the south. I mean, a lot of times they're not sexy, but oftentimes they're very cheap, and it's a great step in. I mean, this thing only cost us $250,000. That we're not retiring off of that, but like it's a great stepping stone. It's a great way for you to get in and get started in a in a classic class.

Michael Russell 13:51

Let's talk about that. You I've heard you say you might build a $100 million portfolio. I mean, you you might not, you might just hang with your daughter and just do go fishing. But the fact is there is a pathway now, you have a vision to go and build a hundred million dollar portfolio, but that started with a $250,000 motel purchase. Usually you don't just go and buy a $100 million portfolio, you got to start somewhere. And again, you took action. So the message you're you're communicating to anyone listening is all right, you're not gonna retire on one of these roadside motels, but you are gonna gain access to information because when you take action and you dive in, you're gonna collect information that can be used to scale to bigger and larger things in the future, but you're only gonna gain that information if you're actually doing it. So that's my takeaway from what you just said. I want to transition into like what you're working on now. You've got this RV park, and you didn't probably have the vision to go and buy an RV park from from forever. Like, are you just kind of chasing projects as they come your way, or do you actually have like a game plan? What are your next steps? What does that look like for you?

Jonathan Mueller 15:00

Man, if I could have a plan, boy, wouldn't that be something? I mean, I've uh no plan here. I am a shiny object chaser. The things that people tell you not to do is to get shiny object syndrome. But I figure in this life, it's pretty short. If I was to only stick with motels and I wanted to do an RV park my whole life, I would live with some serious regret, probably. Now I've got an RV park. Was that a great decision? Time will tell. Maybe I won't do another one and we can get into that. But at least now I won't have that regret. I'll have that box checked off and I'll say, you know what? Now I know what I want to focus on because I've tried the different things. So to all the haters out there that say, don't chase the shiny shiny object, I don't know. I say chase it and see what it's all about. Life's pretty short and it's kind of fun. Bro, that is refreshing. I don't know about that. But so what I'm working on now is I've got a 68-acre RV park in Decatur, Michigan. It's southwest Michigan. We're like two hours from Chicago, an hour from the Indiana border. And we were in the motel business. We are still in the motel business. And what we've realized is that staffing is not easy. It's hard to find cleaners or sorry, housekeepers. It's hard to find good managers. We've got a great manager, but I know when she decides to leave us, it's not going to be super easy. With a three-year-old and a three-month-old, we took a uh road trip across the US with our RV and started staying at these RV parks and thought these people come into the RV park with their RV and they take their mess with them. So we won't have to hire all these housekeepers. Like this seems like this could be a great business. I'm always on Crexy and Loopnet looking at deals. And I was actually looking at hotels, and this RV park came up as uh listed wrongly as a motel, and it was 768 acres and just over a million bucks. And I'm like, geez, that's a lot of acreage. There's a hundred RV spots there. Like, let's go take a look at this. And so that's exactly how we stumbled, stumbled into the RV park world.

Nathan St Cyr 17:20

Number one, you're putting in the action steps to go and grow, right? You've got this experience now, you've got your hotel. In in doing this, you've identified some of the issues, some of the challenges. And then in your own life experience, it opens up this potential vision. And sure enough, this potential vision that you had wrongly gets listed on Crexie as you're taking the action steps. This is just such a key component is that the continuation on a daily basis of just taking the action steps. You're looking to grow. And then here it comes. And you're open to, whoa, what is this doing here? What does this look like? But now here's the thing: have you done any research at this point on the actual RV parks, how they work, what the returns are, margins? Do you know anything about that? Or are you just like, okay, here it is. It just came up for a reason. Let's go. Walk me through that.

Jonathan Mueller 18:13

Okay. So I did not do much research on it. And I was totally wrong about not having to hire housekeepers because it turns out that having 68 acres and a five-acre pond and a pool and a bathhouse takes a lot more work than 23 rooms at a motel. So I've actually got more staff at my RV park than I do at my motel in Colorado. So we've got four housekeepers and a manager in Colorado. I've got me, my wife, a manager, and six employees at the RV park right now. There's just so many facets to think about in the RV park world.

Michael Russell 18:58

Hey guys, quick heads up. Malama Capital, our investment arm, is full steam ahead on finding our next hotel acquisition this quarter. If you know of a deal or you're working on something yourself and want to partner up, we'd love to hear about it. We offer a generous finders fee. Or if it's a fit, we can bring you into the deal for a slice of the equity and give you a front row seat to the whole process from A to Z. There's a short form linked in the show notes. Just drop your name and a few quick details. And if it looks like a fit, we'll be in touch. Now, back to the show. I want to know, I want to before we do into the operations, I want us to talk more just acquisition strategy here. Okay, maybe it wasn't mapped out clearly. You had the whole plan, but you saw this thing. You had to do some analysis. Sure. So can you walk us through what you paid for it? Like how much you put down, how did you finance this? Like at what interest rate? Like walk us through the kind of acquisition bundle.

Jonathan Mueller 19:53

Oh yeah, I'd love to. So let me just go back one step further. The motel that we bought in Fruta, Colorado was really 1.2 million and we put 200,000 into a renovation there. I had said to myself, next deal's got to be bigger. We can't do this again. We we want to start at a bigger point. The place that we bought in Michigan, the RV park, same price, 1.2 million. And so we got owner financing of 800K. And what was interesting about this place is that there's also a house on site. Well, the house is actually on a different parcel. And so I thought if the seller's willing to give us 800K in seller financing at like 5%, then what I'll do is I'll just go get a residential loan on this house next door, and then I can be into this $1.2 million property for like $50K down. And I thought it's foolproof. And so we get all the way to a few days before closing, and my lender goes radio silent, just off the map, can't get a hold of anybody in his office. The sellers don't want to give me any more time. And so I made a list of 10 people. I've been living in Utah for the last 12 years, besides our Colorado motel time. And there's a lot of well-off people there. And so I made a list of contacts and friends, 10 people deep, of who might be able to lend us. I needed $300,000 to get to the closing table in like 72 hours. And it was gonna be a really hard day. I memorized a speech and I started at the bottom of the list the people that I didn't think that might finance me, but probably not because I could refine it for a few people down the list that I know could pull the trigger for me. And I had an afternoon of calls, and fifth person down the list said, We know you, Jonathan. We know what you've done with the motel, and tell me where to wire the money. And so I was able to come up with 300K in less than 72 hours to close the deal.

Michael Russell 22:07

What would have happened if you didn't? Like, would you have just lost all your earnest money?

Jonathan Mueller 22:11

Yeah, I would have lost 40k in earnest money, which is a tough pill to swallow, especially where we're at in our career. That would have set us back a lot.

Nathan St Cyr 22:17

Yeah, absolutely. Well bro, that come on, just time out though, bro. This is what it takes to go and move the needle. This is the stuff, this is the juice, this is a differentiator between forget all the freaking tactics for a second. You needed to go and and address you're like, okay, so what do I go do? The your thought process of going back, creating the list, and then the strategy of hey, I practiced the speech. I knew my presentation, I prepared it, and then I started at the bottom. Like, dude, that's smart. I'm I'm really, really impressed with with that strategy. And that, hey, you got through five no's and you got up to the middle of the line, and boom. Because of what you've done, because of who you are, and because you took action, believed in yourself, went after it, attacked it. There's so few people that would go and do that. I don't know. That's just really impressive to me. And I just think that we all need to take no to that. Like, dude, let's overcome our freaking fear of rejection, of failure, and just get shit done by just going and attacking it. I love this.

Jonathan Mueller 23:25

Well, I appreciate that. And I'll tell you, after the first few no's, I was actually really starting to sweat it because I knew they would probably be no's, but they were pretty hard nos. Where it wasn't like, well, I don't think we can. They're just like, no, that's that's not for us, man. And so I was like really starting to sweat it because I went into it with a level of self-confidence that I probably shouldn't have had. I'd talked myself up the whole day, looked in the mirror, like, you can do this. And then you get a few of those no's and you're like, that was my strategy, but it this is not, these are not these conversations just still aren't panning out how I thought they would.

Michael Russell 24:05

Bravo. It takes a tremendous amount of courage. Like you said, you're a risk taker. I want to get back to some of the tactics here, but I want to know, okay, well, what did you give these guys? You said that you raised roughly 300 grand. What's the return profile on that money? Is this debt? Is this equity? What do the people get for giving you their money?

Jonathan Mueller 24:21

I would have been willing to go either way. I talked to a friend of mine. He said, Hey, my dad's not in, but I can come up with like you're a friend of mine, I know what you can do. Here's 100K. And so I didn't end up taking him up on that, but I was willing to give him 12% on this 300K from one person. I told him 10% interest only and two years.

Michael Russell 24:47

So it's debt. So you just you didn't give away equity, you just raised some short-term debt. They knew you, so they felt comfortable with 10 to 12% interest only debt. And uh, did you pay them off?

Jonathan Mueller 24:58

I'm in the process of refining them out right now, but and importantly, it is secured by real estate. So it is a mortgage, so they've got the first lien position on that parcel because it's two parcels. The seller seller was able to keep their first lien on the the majority of the campground. So it's just a it was an interesting property setup that way where it's two parcels. So I was actually able to keep both of my financings in first position.

Nathan St Cyr 25:25

And are they first position on the campground or first position on the residential?

Jonathan Mueller 25:29

On the residential house.

Nathan St Cyr 25:31

Got it. Okay.

Michael Russell 25:32

So cool. So you're gonna keep the seller financing for the campground and you're gonna refi the residential to pay your investors back, right?

Jonathan Mueller 25:41

Yep, exactly. Yep. And so I'm not moving down to a great rate, as you know, the interest rate environment right now isn't as good as we'd hoped it would be two years ago looking out. We figured we'd be back in the fives, but we're at like 7% on a new residential loan, which is a lot better than 10% at interest only.

Michael Russell 25:58

100%. Yeah. I mean, and it got you moving, and now you've you you own the thing. That's the number one thing is that you were able to forget the fact that you you're looking to benefit by paying less interest. The fact is you were able to secure the property, and without that, you wouldn't have been able to do so. So you made the moves, you evaluated the risk profile, and you took action. Well, what about this seller financing? Like, what are the terms of that? How long do you have with seller financing before you have to refi out of that?

Jonathan Mueller 26:26

Yeah, that's a five-year term with a five-year extension if we want it. So we could have 10 years, it's 5% amortized over 20 years. So a really good rate for the time. And still today, I can't get anything close to that. So we're looking really good there.

Michael Russell 26:41

Okay. Why did the seller agree to do seller financing? Like, how did you position that as a benefit to the seller?

Jonathan Mueller 26:48

I think they were getting desperate, and that was a way that they could not cave on price, but cave on terms. And so they weren't willing to budge on the price. I think I've overpaid now that we're into the property. I think I've overpaid on every property, to be honest. I thought I was a master negotiator. I'm a real estate agent by day. It's really easy for me to negotiate on behalf of somebody else. When it's for myself, I'm not great, I'll tell you that. But we got great terms, and that makes up for a lot. So they were willing to do seller finance because of that.

Michael Russell 27:17

It's an extremely valuable point that you've made because sometimes we get so hyper-focused on getting the best deal that we don't actually get the deal. So even if you are paying more than what potentially the perceived value is at this point in time, if you're forecasting long term, it's a nominal amount. If it's still going to pencil on the long term and you can negotiate the terms to get the deal done and make it a win-win, the best deals come when you have a motivated seller. That's when you can really obtain the best value. And sometimes you just got to put offers out there and move on.

Nathan St Cyr 27:53

Yeah, I gotta okay. So the 400 the residential side, are you living in that?

Jonathan Mueller 27:59

Yeah, we are currently. So we're it is, we're right now. Yep.

Nathan St Cyr 28:02

Okay, so let's just for a moment, if we say, okay, you've got this home here, and then you buy the the rest of it for $800,000, right? I wanna understand an R V park. Like I want to understand the financials of it. So you buy this $800,000 RV park. What's the what was your what's your expected top line revenue? What's your budgeted NOI for the year? And then after debt service, what's the net income look like from a high level? What does that look like?

Jonathan Mueller 28:30

Sure. So our RV park is probably similar to a lot of people's in the fact that we have nightly renters and then we also have seasonals. And so we've got a hundred sites total, and 50 of those are seasonal sites. Just uh it's these people's second home. And so most of them just come out for the weekends, the holidays, or if they've got a week of vacation in the summer. And so those guys are awesome for us because we get the payment for them all at front at the start of the season. So we've got 100K coming in the door right off the bat, which really sets us up for getting a lot of renovations done for the start of the year or kickstarting our property maintenance schedule, things like that. So we've got about 50% that are seasonal. They get a pretty inexpensive rate. They're paying $23 to $2,500 a season plus electric. And then the other 50 sites are all nightly, weekly, and monthly. And so we've got nightly campers, people that'll come in for a week, that are families on vacation or retirees. And then we also have monthlies, which are uh usually people that are in the area to work. So there's a nuclear plant like an hour away. We've got a few nuclear plant plant workers, we've got a crew of road workers that are redoing a section of highway pretty close to us. We've got a new or a pipeline getting repaired. So we've got like 15 people that pay a monthly rate as well. So that that helps stabilize some income too.

Nathan St Cyr 30:07

So what's the overall revenue that you're your targeted revenue that you want to generate on a yearly basis?

Jonathan Mueller 30:12

It is seasonal. So we're only open six months of the year. That's been a little harder to stomach than we had thought, just because we just keep renovating. And so we just keep using our free cash flow to make renovations. That's just the nature of the beast. We could relate to that. Yeah, yeah. And so we're only open mid-April to mid-October, and we bought it off of a gross revenue of 220 a year, and their expenses they said were like 80,000 for the year. We think they really exaggerated those numbers because our first year we were only able to pull in 225, and we had done a ton of work, a ton of marketing. The seasonals at the park said our the park's never been more full, and so really bought it off some probably some illegitimate numbers.

Michael Russell 30:59

Well, how do you verify that though? This is a very good lesson. You just learn somewhat the hard way. Like, don't just trust, don't take their word for it. So, knowing what you know now, if you went back in time, what would be some of the things that you would do to verify that the numbers they share with you are accurate?

Jonathan Mueller 31:14

Well, I think they were smart enough to at least consider their putting those numbers and and getting taxed on those big numbers, even if they weren't bringing them in. So, even on their tax returns, it said like 220 for an income. I think that's the best way you can get those numbers, is probably on a tax return. And so we got a couple years of tax returns, and then well, what year did you buy this? This was in 21, 2027.

Michael Russell 31:37

So you bought it in 2021.

Jonathan Mueller 31:40

Uh, I'm sorry, 2022.

Michael Russell 31:42

Okay, well, here's where I'm going with the direction. I'm thinking, did they experience a surge during COVID?

Jonathan Mueller 31:49

Absolutely. Had COVID not happened, this park probably would have sold for seven or eight hundred K, I bet. But we have captured the people that came here during COVID. We have been able to retain them as seasonals. So even the seasonal side pre-COVID was only half full. So while we did buy off COVID numbers, we have been able to keep most of those COVID guests here. There was a big electric linemen need in the area. And so I think one of those years of that we saw the tax returns for their whole park was pretty much full of linemen, which are monthly stays.

Michael Russell 32:30

Well, high level, like when we underwrite deals, we look at hotels and we can just quickly throw in what we would expect the on average operating expense ratio to be for hotels and more specifically for hostels. There's a slightly different variable there in terms of the numbers, but what can someone expect if they're going to underwrite an RV park? What's the expense ratio?

Jonathan Mueller 32:51

Yeah, for that, I'm not totally dialed in on that yet. It's been a little bit difficult to parse out cap that capital expenditures versus ongoing maintenance, especially with all the grounds maintenance. I mean, we've done two years of tree work where we couldn't even get in a new looking rig because our trees were so low that they'd scratch up the sides of them. And so some of that stuff is ongoing maintenance, some of it we'd put under CapEx, but probably a 40% expense ratio is probably where I'd I'd put that.

Michael Russell 33:27

Okay. Well, it's refreshing. You're just answering these questions so honestly. Like a lot of times people are always posturing and positioning like what they have is the best thing ever. And the reality is this is can get kind of ugly and messy. And you're just like, look, I don't know, or here's what we're dealing with. And this situation with the CapEx versus operating expenses, it's really important. There's things that you can do to reduce your tax burden by claiming more expenses, which potentially could be considered capital improvements. And so depending on how you're to position this, if you're looking to get a loan, you want to reduce your expenses as much as possible. If you're looking to reduce your tax liability, then you want to have as many expenses as possible. And just depending where you are in that cycle is going to affect how you position the operating cost of your business.

Nathan St Cyr 34:19

Yeah. And that strategy, Mike, I think what you just described is just it's so critical to actually have it as a strategy, to be doing it deliberately, like to know where you are in your own cycle, because this is a has a certainly affected us. We've learned as we've gone through this process that based on where you are in the cycle, you want to be very specific and deliberate about why you're doing what you're doing. So that's a good point. Yeah.

Michael Russell 34:45

All right. So let's let's talk about how you intend to ultimately reposition this because we're talking about the advantages of documenting your capex or your operating expenses. And ultimately, when you go to get a loan, you want to have position this properly. So is the intention in the future to go and let's say get an SBA loan where you can refi, you can take out some capital, you can maybe afford to make some additional capital improvements that are necessary, pay off the seller. Walk us through what your strategy is for financing long-term.

Jonathan Mueller 35:15

When we talk about financing, when we bought the 23-unit motel in Colorado, our financing we got there was the SBA 701 loan. And it seemed like a great idea at the time because it goes off of a prime rate. And so your prime rate is like kind of a bank rate that they use. And so they'll just add a certain percentage on top of that as what they will lend on. And so I remember Googling what is prime rate and what has prime rate been over the last 25 years. And it hadn't been any higher over the last 25 years. So I felt really good about getting a variable rate loan, which is prime plus 2.75%, I believe is what we we were going to be paying. And so when we took over, prime was four and a half. And so that was a really good number. And then inflation started hitting, and prime rate went up to eight. And so I was paying double digits on our loan in Colorado. And so you always hear about people that get into these variable rate loans and how silly they were to do it. Well, I had done a bunch of research and we went back to the SBA and said, hey, this is this is crazy. Like we can't pay 10.5%, 11% on an ongoing basis for the next 10 however long until the Fed drops rates. And there was no sympathy from the SBA. I would have thought that they would have slush fund, a program, something that they could roll us into that would help our cause. And really, they were not there for us. So that was really frustrating.

Michael Russell 36:57

Can you tell me though, quickly to understand? Like, so number one, I believe you're talking about your hotel, your hotel has nothing to do with your RV park. Correct. But you know, your Prime went basically Prime basically doubled. And so how did that affect your mortgage payment? Like, what were you paying before versus after?

Jonathan Mueller 37:13

Yeah. So I believe we were playing paying like $7,500 to eight grand a month because Prime would bounce around a little bit. But then we were paying $12,000 a month.

Michael Russell 37:25

Dang. How did that affect your ability to operate in your bottom line? I mean, were you on the brink of collapse?

Jonathan Mueller 37:32

We were not on the brink of collapse. We didn't have much of a cushion. So even though the motel is open year-round, it's still a very seasonal business. We're in a mountain bike town. And so December, January, February, and depending on the weather, March are very, very slow months where we're taking a an L anyway every month there. It was very difficult. So we were really cutting it close for a few months there where we were losing, depleting all of our reserves to make these payments because my manager's salary didn't stop during those cold months. You still have to keep a couple cleaners on. And so to raise our mortgage payment by four grand a month on those slow months was was really tough. So we had to get into a new loan. Luckily, we were able to find a different SBA product. Turns out the SBA has got a few things to offer. It's just that they didn't, you have to get it through a third party. They weren't willing to proactively help us move something over. We had to talk to a mortgage broker, go through all the hoops with them, and then they hooked us into a, I think it's the SBA 701. So we are now at a fixed rate with them, but we needed some track record to be able to get that. So we wouldn't have been able to go into that right away.

Michael Russell 38:48

Huh. Yeah, I never heard of a 701. I mean, we've heard the 504. 7A. Is it the 7A? 504.

Jonathan Mueller 38:55

Is it a 7A? I thought it was a 701. Maybe, maybe a 7A. I don't know.

Michael Russell 39:00

The point that you're making here, while Nathan looks this up to verify, is there's a lot to learn, man. I don't know if there were other podcasts around back then, but I don't know of any really. I'll maybe toot my own horn here, but it sure as heck is nice for to have a podcast like this where people can just get out there and be vulnerable like you are right now and walk through what mistakes you made so that we can all learn from it and not make the same mistakes. So I appreciate you talking about this. Even if in hindsight you're looking at like, dang, like I wish I would have done this or I wish I would have known about that. The lesson for me, I hear you saying, is look, you got to make sure you have a margin of cushion that far exceeds what the potential risk factor is and you can't control everything. So it's this balance, like we start we talked about in the beginning of taking action versus uh having risk mitigation. And not every situation is gonna have that buffer that just allows you to be able to be prepared in case something like this happens. But it sure is something to consider when evaluating what potentially could go wrong and maybe. Sure, that if possible, you've got a buffer built in.

Jonathan Mueller 40:03

Yeah, and that's really why I'm on this podcast. These materials were not like there was nobody talking about this stuff when I got into the the motel space. It was, and there's still probably not a ton of information out there, but having you guys around and sharing all this stuff sure, sure will hopefully help a few people not fall into a few of the traps that that I've gotten myself into.

Michael Russell 40:24

Yeah. Let's talk about the future. You said you've you might build a hundred million dollar portfolio, or maybe you're just gonna hang out and you're gonna take your daughter fishing. So are you planning to scale or are you thinking you're gonna slow down?

Jonathan Mueller 40:36

That's a great question. I don't know. I I love the idea of building a hundred million dollar portfolio. That sounds like a really cool goal, but in reality, I'm a doer. I'm not the guy that can sit in front of his computer for all day every day. And I think that's probably what it would take to build that kind of a thing. And so I'll probably be happy building something much smaller that I'm way more hands-on with where I don't have to be in front of the office every day.

Michael Russell 41:01

Yeah, that's it's a really valid point because sometimes we assume that people that have $180 million real estate portfolio are better off because they have more money. But at the end of the day, it's what's going to bring you the most happiness. And every one of us are unique individuals. Sometimes we're most happy just working for the pursuit of providing great hospitality to be right there immersed with our clientele and watching those memories being made, as opposed to sitting in an office with a computer and crunching numbers on a spreadsheet. Sure, there might be more money at scale, but again, different people have different interests. So I like that answer. I think it's an honest answer, and I can definitely relate to it as well.

Jonathan Mueller 41:45

Yeah, with I I can't take my my little girl fishing every day. If I'm at an office off-site somewhere, instead I can take a lunch break and put a couple worms on a hook and make some core memories. So maybe I'll stick to that.

Michael Russell 41:58

All right, Jonathan. So listen, if our listeners want to follow your journey or they want to stay at one of your properties, where's the best place to find you?

Jonathan Mueller 42:06

Yeah, Instagram is kind of where we do everything. So my Instagram handles Mr. Mox, so it's M-I-S-T-E-R underscore mocks, and our properties are Camp Forest Haven and Balanced Rock In. So we'd love to have y'all stay with us.

Michael Russell 42:22

Yeah, we'll put that in the show notes for sure. Cool. Right on, right on. Okay. So listen up, listeners, before you go, if you've gotten anything out of this episode, an idea, a tactic, a little inspiration, do us a solid rate and review the show. Seriously, like right now, not later. Don't say I'll do it tomorrow because you won't. Like you're here listening, phone in hand, your app's open. Like, go in there right now. We're we're here pouring in time, energy. We're drinking a lot of caffeine to bring on high quality guests here. We're sharing everything, we're learning and hopefully making this worth your time. So, you know, we we're not doing any ads, there's no fluff. This is just real talk and real deals. And all that we ask is to help us grow this thing so we can keep leveling up the guests, the insights, the mentorship that we all wish we had when we started out. So, do the right thing, tap the stars, write a quick sentence, tell the agar algorithm that we exist, and you know what? We appreciate you. So let's keep building. This has been another great episode of the Hotel Investor Playbook. We are Mike and Nate, he is Jonathan Mueller, and we will catch you again next week. Aloha