Building Hotels That Last the Test of Time | Brandon Gore E45

Most hotel investors default to syndication — raising capital from dozens of limited partners and layering in complex waterfalls. But what if there’s a smarter, simpler path?

This week’s guest, Brandon Gore, is building The Outlier Hotel, a 10-cabin luxury retreat in Arkansas designed to last 100 years. Instead of chasing the traditional syndication model, he’s structuring the project as a joint venture — lowering pressure, creating strong cash flow, and unlocking tax advantages that limited partners usually can’t access.

In this episode, we dig into:

• How intuition plus data shaped Brandon’s decision to buy land on a hunch
  
  
• The financial model behind The Outlier (ADR, occupancy, and NOI)
  
  
• Why joint ventures can sometimes outperform syndications
  
  
• How accelerated depreciation makes this deal especially compelling
  
  
• What it takes to build hotels that align with your values and your legacy

This is part business case study, part lesson in trusting your instincts — and a rare look at how different deal structures can change the game for hospitality investors.

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

About Brandon:

Brandon Gore is a designer, builder, and entrepreneur known for blending craftsmanship with innovation. He is the founder of Gore Design Co., Hard Goods, the Concrete Design School, and EarthForm Rammed Earth, where he has pioneered sustainable building with concrete and rammed-earth construction. Today, he is developing The Outlier Hotel in Eureka Springs, Arkansas—a boutique property that reflects his vision for timeless design and lasting architecture. Brandon has also shared his expertise as a TEDx speaker, podcast host, and judge on the design competition show Framework.

Connect with Brandon:

Instagram:@outlierhotel & @hardgoodsco

LinkedIn: https://www.linkedin.com/in/goredesignco/

Website: Gore Design Co. & Brandon Gore

Connect with Michael on Instagram or LinkedIn.

Email Us at info@hotelinvestorplaybook.com

Visit the Hotel Investor Playbook Instagram

Invest with Malama Capital

Submit a deal

Transcript

Michael Russell 0:00

What if you could build a hotel without the weight of bank debt or the pressure of hitting investor waterfalls? That's the path today's guest, Brandon Gore, chose with the Outlier Hotel in the Ozarks. After climbing the corporate hotel ladder and then making a name as a world-class concrete craftsman, he returned to Arkansas with a bold vision, a 10-cabin retreat built to last for generations. In this episode, you'll hear how he bought the land on a hunch, why intuition plus data beats spreadsheets and the financial model behind the outlier. And instead of going the traditional syndication route, Brandon is structuring this as a joint venture, creating both strong upside and unique tax advantages that syndications typically can't offer. At its core, this isn't just about making money. It's about building with principles, creating legacy assets, and investing in a way that aligns with your values. 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 in hospitality assets. So, hey, listeners, before we jump in, quick shout out. Look, we picked up five new ratings last week. So for those of you that went out and did that, thank you. Seriously, like you are fueling this thing for us. So here's the deal: our goal is 100 ratings by the end of this month. We're halfway there. We got 50 to go. If you're listening right now, go out, help us hit that goal, scroll down, tap those stars, leave us a review. It takes 20 seconds, costs you nothing, but it does make you an official part of the hotel investor playbook crew.

Nathan St Cyr 2:14

So, all right, let's do this. And if you didn't, shame on you. If you've gotten value, dang, bro. If you've gotten value from us and you're not hitting us with the review, what's up, bro?

Michael Russell 2:26

Come on. All right, let's get into the show. Let's let's do this. We got an interesting one today. Brandon, welcome to the show. You you've got one of the more unusual paths into boutique hospitality that we've seen. You you started in the corporate hotel world, you climbed your way up to overseas sales and for seven different Marriott properties. And then one day you were on a mountain bike ride. You you afterwards went into Barnes Noble, you flipped open a magazine, and you saw this photo of rammed earth or like your rammed earth home. And in that moment, you just decided to go down a completely different path. Basically, you you pivoted from the hospitality industry into mastering concrete craftsmanship and launched your own design and construction companies. But now you're blending that skill set with that hospitality background to build something that is really truly original. And so you're now bringing to life the Outlier Hotel, which is a 10-cabin boutique retreat in the Ozarks, right? In in Arkansas. Yep. And it it's built from rammed earth, right? Timber, glass. It's it's really designed to connect guests to the land in a way that most hotels can't. So we've talked a lot about this with experiential lodging and the advantages of really providing this artistic experience. I I want to get into that, but before we do, right? Look, before a single guest checks in, how confident are you that this is going to be profitable? And what's that confidence based on?

Brandon Gore 4:04

Yeah. Well, it's based on data and it's based on living in the region and seeing the void in the market firsthand. So I was born in northwest Arkansas. I grew up there. I grew up on a dairy farm in northwest Arkansas. And Eureka Springs, the town where the outlier is going to be built, is always been driven by hospitality. So in the 1800s, all these hotels sprung up there. There's medicinal springs and Ozarka Water. I mean, you're probably familiar with that. It originally started in Eureka Springs, Arkansas. They built a train line to bottle the water. But it's always been driven by hospitality. And there's a really famous chapel there, Thorncrown Chapel. There's just a ton of demand. And in recent years, the Waltons of Walmart have invested hundreds of millions, if not billions of dollars, into the mountain biking trail system in northwest Arkansas to put it on the map as the preeminent mountain biking destination. And one of the big trail system parks they built is directly across the street from the land where the outlier would be built. And so this hotel is really driven on adventure hospitality, the mountain biking tourist, and also the people just coming to Northwest Arkansas for the Crystal Bridges Museum and just all the other attractions. So that's what the demand is. But Eureka Springs, tons of hotels, a lot of Airbnbs. They're all full capacity. I had a neighbor up there that built yurts. I'm sure you know what yurts are. And I always noticed he was on my same road. I always noticed cars going up and down the road. And one day I talked to him and said, What's your occupancy? And I'm used to 40 to 60% annual. And he said 97%. And I said, for the summer, he said, no, for the year. I'm 97% annually occupancy. And I didn't really believe that to be true. I thought maybe he was incorrect on that. And I got on Air DNA, and sure enough, he he's telling the truth. That's where he's at. And there's a ton of unique experiential properties there, tree houses, different things that are booked up two to three years in advance, 100% occupancy for years. So the demand is there, but there's a void in the market for a higher-end luxury property. And so that's what that's what I'm focusing on is a higher-end hotel.

Nathan St Cyr 6:10

Can I call a timeout? So when you say that there's a void in the market, like how do you know that other than just like looking at here's air DNA, here's what it says, these things are this percentage. And I feel like nobody's doing this. But how do you know that to be accurate? Driving that type of ADR is typically gonna be a very different client looking for something very different. So how do you quantify that your the way that you're feeling about this or what you've identified from a thought is actually from an investment side that you're on the right track?

Brandon Gore 6:51

Sure. Well, because I live there. I spent seven years. We built a rammed earth modern cabin. I built my studio there, and I live there. And you see the clientele there come into town on the regular, and then you see the accommodations. And so there's Opera in the Ozarks, which is this opera center that again the Waltons funded another 40, 50 million to rebuild it. And it's literally three minutes down the road. So every day, every weekend, the town is full of Porsches, Lamborghinis, all these things. And there's a best western. There's a days in, there's Airbnb that has real tree camouflage recliners. The demand is there, but the accommodations aren't matching the demand. Now, not to say that those places don't fill up with other tourists, but there's a large segment of the population that comes to Eureka Springs for the day, and then they go back to Bentonville, Fayetteville, Rogers, which are the surrounding towns, to stay at the Nicer Hotels, the 21C, or there's actually eight boutique hotels under construction in the area right now, not in Eureka Springs, but in Bentonville and Fayville, to serve those clientels. So they're coming up to the to this mountainous town for a day trip and they're traveling back to stay someplace else. So the demand is there. There's just nobody serving that clientele.

Nathan St Cyr 8:01

Okay. And so when I hear there's eight or ten boutique hotels that are being built right now in the surrounding area to serve those clients, I go, what's that going to do to my supply and demand? But I'm assuming that what you're saying is that you're right there. You're across the street from and is my assumption wrong? Or is that where you're like, look, here's how I'm going to differentiate, not just in concept, because I understand that this concept's going to be frickin' epic, but hey, all this stuff is getting built. When that's one of the things that we look at in a region, if there's more inventory coming to the market, that's usually not a good thing for us.

Brandon Gore 8:44

Yeah. No, I think it's a great thing, personally. So the Waltons, Walmart, this is a very different economy. It's it's kind of this bubble that exists. Northwest Arkansas is this crazy place. And it's a forced economy in a sense of it doesn't matter what the outside world is doing, tariffs and interest rates and everything else, construction there never slows down. They're always building, it's always growing, and there's just more and more and more always coming into the region. So I'm not surprised to see eight boutique hotels being built right now. But the thing about all these hotels, they're really cool. But you know, things like the graduate ace, not that they're the ones being built, but they're all the same. They're branded boxes. They have a vibe. You go there, it's kind of a hip hotel. What I'm wanting to build, and the vision that we have for the outlier, is more something along the lines of Amon hotel or something of that nature, where the luxury is the architecture. The luxury is the materials used. It's not just kind of uh some hip furniture and artwork on the wall and a neon sign, but more than that. So it's a different level of luxury. And there's more millionaires and billionaires per capita in the area and that travel to the area to meet with Walmart and the vendors that again are used to those levels of accommodations and other places. But when they come to Northwest Arkansas, the best they're going to find in the area is going to be 21C, which I have nothing against 21C. I think it's phenomenal. But again, it's pretty much a white box. And so we're wanting to take it to the next level. And so one way I did that really was bringing on Omar Gandhi architects from Halifax, Nova Scotia. And so we invested heavily, really kind of went all in on getting the best architect, one of the best architects in the world to design a world-class hotel and not just rely on kind of the normal shtick that people do, which is some hip furniture and artwork. So we're going a whole different route, which will differate differentiate the outlier from all the other boutique hotels being built.

Michael Russell 10:41

Well, first of all, I I just I want to acknowledge what you're communicating about the fact that you're from there, like boots on the ground, like being in the experience itself to understand and have some sort of like just a feeling and a sentiment based on affluent people being around, lack of supply. Like there is value in just having a sense, a pulse of what's going on in the area, other than just like remotely looking at stats on a spreadsheet or pulling up comps on CoStar and things, like being there, there is value in that. So I don't want by any means to discount that, but I feel like it's a combination of things, right? Yeah, there's there's intuition, there's vision, and then there's data. And and we kind of led with how is this thing profitable? And you said, well, there's data. And so I kind of want to lean back on that data for now at least, because I'm really intrigued by this. And also I'll communicate, dude, I I've never been to Arkansas, but coincidentally, not too long ago, I had a friend of mine here on Maui, where we live, that was talking about the next trip that he wants to take, which was to Arkansas. And I believe he said Bentonville. Look, I'm no expert on this, but the name Bentonville, he walked me through the story that you kind of talked about. But he was describing how they went and built all these awesome mountain bike trails to really make the the town known for the awesome mountain biking there in that town, bring people there. And so the fact that my buddy in Maui is talking about going to Arkansas, that aligns very much with what you're talking about, how people are going there. There is tourism demand. Now, as far as the data goes, I mean, our podcast is called the Hotel Investor Playbook. So the lens that we're bringing here is really like, okay, cool stuff, great, awesome experiences. But at the end of the day, we want to know do these things make money or are they just passion projects? They both have value and they bring value to people's lives. But we're under this very specific lens right now, where like, how do we make our investors money? So you're talking about the value in bringing in an architect, like a world-renowned architect, to go and develop something that is truly unique and maybe one of a kind in its experience. In my mind, I'm seeing dollar signs. Like the reason you go through that effort to hire this architect and to develop this unique brand and concept is because you're expecting to get a high return on that investment. And so I'm wondering like, how do you model the ADR and the occupancy and the seasonality to arrive at these financial projections? If nothing is out there right now specific to this, then what are you doing to develop these projections? So let me summarize. Can you start with like what is your expected ADR, your expected occupancy, and how does seasonality affect overall profitability?

Brandon Gore 13:35

Yeah. I'm gonna hit all that for you, but I want to back up really quick to the mountain biking part because that's a really important part that plays into this. And so the mountain biking there is one of the main drivers. So the first mountain bikeable skyscraper in the world is in Dentonville. They built a skyscraper that has a mountain biking trail system, it goes all the way around the exterior to the roof. The first mountain bike lift system, like a ski lift, is gonna be in Bella Vista, which is the same area. And this is all being funded by the Waltons. And so essentially the Waltons are putting a billion dollars into it that I will benefit from by building a hotel that caters to that demographic. But the demand is there. Eureka Springs on the weekend is $200,000, $300,000 sprinter vans with $50,000 mountain bikes all over the place. So all these people travel in from Colorado, Montana, California every single week to mountain bike. The trail system that I'm referring to that's across from my property has a tram system that brings mountain bikers up from the bottom to the top and it drops them off literally across the street from the outlier hotel. So guests at the outlier can mountain bike across the street and be at the trailhead in 30 seconds. It was very lucky we got this piece of property. It hadn't been on the market since the turn of the century or the early 1900s, and a trust had bought it. And when the last member of the trust died, I got the property.

Michael Russell 14:52

So there's a barrier to entry. What you're saying is there's high demand, and it's not like there's just tons of land available all the time that's in the same location. So there's some sort of exclusivity in what you have that you recognize there's intrinsic value.

Brandon Gore 15:07

Yeah. The well, the land that I bought. So I lived down the road and it was on the corner of two highways. When I say highways, they're two-lane highways. It's not like LA highways. So two-lane highways, it's in the mountains. It was on the corner and I was driving by and I saw a realtor nailing a for sale sign in. And I backed up, I took a picture of the sign, I called the number, that it had gone on the market that morning. This was like 9 a.m. and they'd received three lowball offers. And the bank that had listed it said they'll only take full price. It was a sale when the last member of the trust died, they're liquidating assets, the bank is, and they'll only take a full price offer. And I said, done. I bought it. So I bought it that morning. I always assumed it was state land. It had always been just forest. And I assumed it was owned by the state of Arkansas. But no, it had been in a private trust. And so I'm the third owner of the land. It's never been developed, but it's directly across the street. And so when this happened, there were excavators in the woods across the street. And it wasn't clear what they were doing. I had a feeling they were building mountain bike trails, but I wasn't certain. But I had a hunch, and it turned out to be true. And so I got really, really, really lucky. Uh, land in Northwest Arkansas is becoming much, much harder to find now. And especially land like this, which is literally just right outside the city limits, that doesn't exist. That was a once-in-a-lifetime thing. When when I bought it, my wife was like, Do we really want to spend the money right now? I'm like, Aaron, this we'll never have this opportunity again. It'll never come back around. And so I bought it just based on that hunch that that's what was going on. And and I was right. The financials.

Michael Russell 16:38

Well, hey, real quick, kudos when you just said, Oh, I bought it that day. That is contrary to my nature. I'm like, wow, because that's impressive.

Brandon Gore 16:47

Sometimes you gotta make those moves, and you gotta make big moves at the right time. And you know, when when you get that hunch, you gotta go all in.

Nathan St Cyr 16:54

This is really, really important though. Your life experience to that point in living there, in what you were seeing occurring in front of you. There's a lot of skill that had been stacked to that point in life experience. And this is the part where, from a mindset standpoint, so often people, their their fear will get in the way of them accomplishing what they really know to be true. You knew that to be true, bro. You said it. This is a once-in-a-lifetime opportunity that happens very rarely, and your whole accumulation of skill and life experience told you that that was the moment to take advantage of and you took action. That's rare. That's the rare part. People have that, they have that sense, they have that feeling, and then freaking 15 years ago, 15 years later, they'll look back and they'll tell the story of, oh my gosh, I remember the day that the guy was out there. We actually called in and blah, blah, blah. But man, that thing sold that day and it went to, and now look at what the thing is worth. This, these stories happen all the time.

Michael Russell 18:00

And also, too, look, Nate, we were just talking about this the other day. Right now, we're lining up an opportunity in Idaho. And the reason being is to start at least, it's just sentiment. Like I visited Idaho over the fourth, fourth of July week, and I had never been to Idaho, and I was blown away with the feeling, and I could tell, like, okay, here's an example. In the airport, the advertisements in the airport are all about like, welcome to your new home in Idaho. Like, there's this feeling of like, wow, a lot of people are moving to this location, to Boise specifically. That's where the airport was. There's these intangibles that it's like, wow, okay, there's demand here. I'm noticing these things. We stayed at a lake a couple hours outside of Boise, and I could tell this lake area is it's got all the potential to just boom. Like they're building a new ski resort, and the person that's developing it has experience in Colorado building out ski resorts. And so I know, like, okay, they're putting in hundreds of millions of dollars into the ski resort. There's clearly a reason they've done the research, they've analyzed that this is a good market for that. It's kind of like when Starbucks gets put onto a street corner, you're like, well, if Starbucks is there, it's probably there's gonna be an investment opportunity here. You don't have to necessarily know all the data up front.

Nathan St Cyr 19:15

They did their damn research.

Michael Russell 19:17

Yeah, you would just you would hope, right? And so look, I hear what you're saying. I think that there's there's a lot of value in just having that life experience to recognize an opportunity. And then look, for Idaho, we're not just gonna be like, wow, this place looks magical, it looks special. Well, let's go buy something here. We're we're also now gonna dig into the data and the ADRs and the occupancy and all of the other like factual things that like you have to use to justify the investment. But the vision starts with identifying opportunity that that doesn't come from data, it just comes from intuition and vision.

Brandon Gore 19:50

Absolutely. Well, to speak to what you were saying about saying yes at the right time, that's a lesson I've learned many times in my life is paralysis by now. This will be your greatest regret. I've been cast for a couple different TV shows. I didn't want to do it. And so I went into the last meeting and I told them, I know you guys want me. I don't want to do it. They thought this was hilarious, the producers of the show. And I said, if you guys need a judge, I'm your man. Otherwise, peace. And I walked out. I just got up and I left the meeting. And I went and packed my bag. I was ready to go back to uh at this time I was in Phoenix, Arizona, ready to go back to Phoenix. And there was a knock on my door, and I opened the door and it was one of the producers. And they said, Hey, they want to send you to do a screen test to be the judge for the show. I'm like, I was joking. They're like, well, you said it. And we looked at each other and said, This is our guy. And I turned out to be the judge for the show. It was a show on Spike called Framework, a furniture design competition. But had I not said that, had I just said, thanks for the opportunity, I don't want to do it, and I had walked out, it never would have happened. That experience never would have come to be. So I've definitely learned unless you put it out there, unless you say yes at the right time, say yes to opportunities, those things will pass you by and you'll regret that moment for the rest of your life. So I always try to say yes to the opportunities when they come. And I get frustrated when I talk to somebody, I'm trying to bring them in on something, and they're again hesitant. I don't know. You know, let me think about it. Like, bro, say yes. You're gonna die one day. Let's do this. Like, what are you waiting on? You know? So everybody wants 100% security, and there is no such thing, but like take chances. You only get one chance at this. So go all in. That's my mantra. I go all in, give it everything, and if it doesn't work out, it doesn't work out. But you gave it everything. You did your best. So, as far as financials, to get back to that. So I hired a guy. I've run my own business now for 21 years. I feel like I'm pretty good with numbers, I'm pretty good at business, but I wanted an independent third parties perspective on this before we hire this architect and we just go balls to the wall, spend a lot of money. So I hired a financial guy in Northwest Arkansas. He's an ex-Navy SEAL or Green Bray, I'm not sure, special forces. And he went to West Point, super smart guy. This is all he does is financials. And I told him where I wanted to be. I told him we wanted to be at a 680R, and I felt that 80% occupancy was was realistic. And he's like, I don't know, man. That seems that seems really high. And I'm like, oh well, just that's where I'd like to be. But just do your own research and take a look. And uh a couple weeks later, he got back to me, put together a report, and he he said, I can't believe it. When you said that, I thought that there was no way the market would support that, but all the data says that that's right in line with what is realistic. And so that's that's where we're at with this is 600 ADR, 80% occupancy. Actually, he ramped it up a little bit based on his data. He took it up to 87% and a higher ADR, and I said, no, let's back it back down to be conservative. But the data that's available for occupancy rates and ADR for Northwest Arkansas supports those numbers.

Nathan St Cyr 22:41

All right, so I see Nate doing the math. Is there 10 is there 10 units? 10 units, yep.

Michael Russell 22:46

Yeah. So you're looking at well, just over 1.7 million dollars you get online revenue. Yep. Which is pretty healthy. Uh I mean, that's great.

Nathan St Cyr 22:54

Yeah. So I'm I'm like putting together the picture and I'm like, okay, so now what is because you talked about this this luxury piece and then amenities, and I've seen you in just doing research, I've seen you have some Amon comparison comparisons, and then I'm thinking, what's it gonna cost to run this damn place? Like, what's it really gonna be? Now that we have a revenue number, I'm kind of working backwards and being like, all right, well, what's what's your expected expense ratio?

Brandon Gore 23:22

Essentially what we did is we modeled having two full-time housekeepers and a local property manager that lives in the area to uh run and operate this. 10 units. So it's gonna be a skeleton staff. The amenity is the architecture, the amenity, the luxury are the materials. So it's the design. So we have on-site mountain bike trails, single track trails. Well, the design has several fire pits throughout the property, gas fire pits through the the through the forest, and then we have a pool and a hot tub, and on-site bike storage and on-site bike wash, where people can store their mountain bikes and secure lockers and then a bike wash component. But we don't have a spa, we don't have an on-site restaurant. So as far as staff goes, there's not a whole lot of staff needed.

Nathan St Cyr 24:02

Hey guys, if you're excited about investing in hospitality but still have a few question marks in your mind, you're not alone. Maybe you understand the potential, but you're not quite ready to take down your own deal yet. Look, earlier in our journey, both Mike and I invested passively alongside seasoned operators, which gave us a behind-the-scenes view and showed us the playbook while our money worked for us. That's what we offer our capital partners: a chance to be a part of real deals, see how they come together, and start building the confidence to do in yourself without carrying all that risk on your first go. If you'd like to know what that might look like for you, click the link in the show notes. Now let's get back to it.

Michael Russell 24:39

Yeah. No, okay. So look, just from experience, I mean it's a micro resort, but they're vacation rental units. I would just say from rule of thumb, like just use 50% as your I mean, you might be less than that, but to be conservative, if you ran a 50% expense ratio, you know, you're looking at what, like 860 something thousand of NOI.

Brandon Gore 25:00

Uh actually we we have an NOI of 1.2 calculated.

Michael Russell 25:03

Okay. Well, that that doesn't surprise me.

Nathan St Cyr 25:05

35% expenses or something.

Brandon Gore 25:07

Yeah.

Nathan St Cyr 25:08

Yeah.

Brandon Gore 25:08

Yeah. So NOI of 1.2. And then if we do a conservative cap rate of 7% for this type of accommodations, that'd be 17 million valuation at a 7% cap rate on a 1.2 NOI. So yeah, that's that's what we're projecting. We could do a more aggressive NOI of 6%, but I feel that 7% is is realistic. Okay.

Michael Russell 25:31

Are there any other properties out there that you can model this uh after in terms of cap rate or in terms of valuation?

Brandon Gore 25:38

Well, so that's where I leaned on Luke to do his research. And this is what he does is hospitality investments. And so if we were doing more Airbnb type setup, or the cap rate wouldn't be seven, it might be an eight to ten. But being that this is luxury accommodations and being the quality of the build and the quality of the architecture, and that's really what's is driving driving the cap rate to be at a seven.

Michael Russell 26:00

What's it gonna cost per square foot to build these?

Brandon Gore 26:03

So I'm the builder. So I actually built. I'm a builder, I build Rammed Earth. If I hired somebody to come in and build this, realistically, this would probably be a six to seven million dollar build. I've been I worked for about a year on the construction budget on this of going through and working with the architect to refine the design and make it more buildable buildable, to make it more efficient to construct. And right now the construction cost is right out three and a half million.

Michael Russell 26:25

All right. So I mean, if you're netting 1.2 million in net operating income. Without debt service, of course, you've got to figure out what your debt service is, but your income is 35% of what your total build is. Of course, there's land. Yeah, I don't know how much you got the land for, but from a gross rent multiplier, like you're crushing it, right? Like this would this would stick out as a good value. But can we talk about financing? So you look, you're a builder, so it's gonna cost three and a half million bucks. I I would assume you don't just have three and a half million dollars in cash laying around. And so you're gonna have to go borrow some money, you're gonna have to partner with an investor. Then what's your capital stack look like to be able to go and finance this?

Brandon Gore 27:07

That is a great question. And that's really the crux of the situation at the moment where I think a lot of people find themselves. And so, Luke, my financial analyst that I hired, phenomenal guy, super smart, way smarter than me when it comes to this. He put together the capital stack for this with a traditional bank loan, a micro pool of investors, and a bridge loan. And I went down, we met with banks, banks were interested. He already has investors that are interested in in the project, already has somebody lined up for the bridge loan. But it was a very complex structure with the IR waterfall structure and everything else. And I just it it made me very uncomfortable. I did not love this setup. It put a lot of pressure on stabilizing quickly. The investors want to start receiving their payouts. I'm just, it makes me makes me leery. I think of like COVID and you never know when these black swan events will happen that will stop things for two to three years, and you can't project those, but they happen from time to time. So having that, having that debt service that you're having to take care of, regardless of what happens, makes me very nervous. So speaking of Boise, my best friend is a builder in Boise, and he's a developer. And he has several projects going on right now. One's a coffee concept, another one are commercial spaces. But what he does is he works with investors and they go in on a property 50-50 or on a project 50-50, like the coffee concept. He's the builder, they bring the money, they build everything, they own the asset 50-50. There are no outside banks involved. There is no debt service. The money invested from that side, they do evaluation and the money invested funds the project, but then it's a zero debt project at that point. So that's when I talked to him about that, that changed things. So I went back to Luke. Luke had assumed I wanted to keep as much equity as possible in the project, that I didn't want to give up equity, which is why he structured the deal the way he structured it. When I told him I was open to selling 50% equity stake in the project to fund the project without any outside financing, without a bank loan, he was like, dude, I didn't know you're open to that. The fact that you're open to that, that's a thousand times better way to go about this if you if you are willing to give up 50%, which I am willing to give up 50%. So that's where we're at now. And if we can fund the build and build this with no debt service, with no outside bank financing, um, that would be the best way to do it. Now it might end up being a combination. Like I said, I I have people interested that want to invest. I don't know if anybody wants to come in and do the full 50% buy-in. And it might be that we raise a 30% stake and then we go to the bank for the remainder. But I prefer to just have one partner that owns 50% and that funds the construction and we go that route.

Michael Russell 29:47

Okay. So you're describing the models, a joint venture. Exactly.

Brandon Gore 29:50

A joint venture, 100%.

Nathan St Cyr 29:52

A 50-50 joint venture.

Michael Russell 29:54

You got it. Yeah. And so if we go back to that number, if we're expecting $1.2 million to be earned, right? Net operating income, you got it. And it's going to cost three and a half million dollars. So if you're splitting that $1.2 million, 50-50, then that's $600,000. So you take $600,000 and divide that by three and a half million, that's a 17% return for that investor. But if I were the investor, I might go get a home equity line and give you a portion of that, or maybe if you could pony up the money and you could pay borrow at eight percent and collect twice as much. Like, I don't know, that's my lens on things. I would be like, well, yeah, I mean, I you'd have to have a little more of a risk tolerance, but I see where you're coming from. Yeah. Hey, someone's got the cash, 17% cash on cash. It's a pretty healthy return for a joint venture opportunity.

Brandon Gore 30:48

Exactly. Like I said, I put together this DF, but it has all the financials broken down on the cash flow. It's $2.9 million in cash flow back to the investor by year five. There's buyout options at year five and year 10. It's a good financial investment for the investor, but also on top of that, and this is what my my best friend and Boise has found with his financial investors, is it's a tax shelter for their they either invest that money or they lose that money. And so by investing it, you do the accelerated depreciation, a cost segregation analysis on the property. They're able to offset a tremendous amount of their taxes, and then they recoup their money and they own an asset that has gone up in value. And so it's a win-win for them for them. And so I'm looking for somebody that's in that position. They need to either invest it or they're going to lose it to taxes, and they can be a partner in something that is a meaningful asset. We're not building, you know, warehouse spaces or whatever. We're building something that's going to be around forever, which is my vision with this. Is I want to build a hotel that is relevant today, it's relevant in 100 years, it's relevant in 500 years. I want to build something that's going to last. It's my legacy, it's my great grandkids' legacy. And I think the right investor feels the same way. They feel like, let's build something meaningful.

Michael Russell 32:00

Okay, but I great, it is. I'm thrilled to talk about the meanable stuff of this, but I'm an investor. So I'm like, holy crap, okay, you're you you really struck a chord with me when I start calculating. So let's just say I've got three and a half million dollars that I place, and if I can use accelerated depreciation now that bonus depreciation comes into play, if we I don't know what the exact amount, nay, what would be an an appropriate amount to use is like what what what number for depreciation could we realistically expect? 50%, 70%?

Nathan St Cyr 32:38

No, he's probably gonna get dollar for dollar because the whole builder is new.

Michael Russell 32:41

Because it's not land. Three and a half million is the build-out, no land. Correct.

Nathan St Cyr 32:44

Yeah, yeah. But all of this money is going into the build-out, and then when you look at all of the concrete furnishings, especially if it's not used just in obviously the frame, the foundation, because you're gonna lose a lot of it in the foundation. But man, when he's talking about putting in a pool and putting in, I'm gonna assume that from a valuation standpoint, they're gonna get pretty close to dollar for dollar depreciation. I don't know that is a fact, but it's my gut feeling.

Michael Russell 33:10

And and look, consult your tax CPA. I'm not I'm no accountant, so I'm just I'm throwing out some stuff here that is at this point theoretical, but there's there's some merit to going through this analysis because it might might apply in in different situations. So I want to go through this exercise because look, let's just say three and a half million dollars is invested, and if that 100% of that can be accelerated and depreciated, then if you're able to offset three and a half million dollars worth of active income, then you're not having to pay taxes on that portion.

Nathan St Cyr 33:45

I want to point that out though, what you just said of active income, because it's the structure that allows that, because they're a JV versus a limited passive partner. And that's a very important differentiating piece. Setting this up as a joint venture where the operational agreement can have that active, can qualify as that active source, now it can bleed over into other active income. However, if you're just the if you are just the LP, it's only passive and you don't have other passive write-offs, then that it might not be as beneficial. But the joint venture structure is very attractive because it can it can qualify then as active.

Michael Russell 34:24

No, this is a very good distinction. I'm glad you made that point. So thank you. But let's go, let's move forward with this scenario here. So we're kind of doing the numbers math, we're we're doing the math here live, but three and a half million dollars. If you're if you're at that high of an income level, you're you're let's just assume your taxes are a 50% tax. And if you can subtract that, then basically that's a that's a net savings and taxable income of $1.75 million. Exactly. Yeah. So you're going to invest three and a half million, but the government was going to take $1.75 million no matter what. So by doing it this way, now, granted, this is tax deferred, it's not like the money just evaporates, right? Like at some point you got to account for this. But year one, let's say, with 100% bonus depreciation, if you could deduct $1.75 million, you're not having to pay the government. That money is staying in your pocket. So there's investments that make you money and there's investments that save you money. This part is saving you money. So if you really look at the net investment, if you subtract $1.75 million from the three and a half million dollars you invested, because you would have paid that anyway, it's $1.75 million.

Brandon Gore 35:38

Exactly. For an asset that is valued once stabilized at $17 million.

Michael Russell 35:44

Yes. Yeah. But even before we get there, yeah. If you're getting $1.2 million divided by two, because it's $50-50, if you're getting $600,000 divided by $1.75 million is your net investment after tax deductions. It's a 35% return. Yeah. Because it was seven, it was 17%. We already did the math, so it's just double. It's it's 35%. 34% is actually what it is.

Nathan St Cyr 36:09

That would be your cash on cash after your net impact. Yeah. Better than a than a savings account.

Michael Russell 36:15

Yeah. So look, not everyone, everyone, perhaps people listening to this are like, oh, it's all well and good, but I don't have three and a half million dollars laying around. I I'm only going to this exercise because the joint venture is really attractive. I want to circle back to what you described with the pain points of being over-leveraged and having investor commitments and high investor returns. You're absolutely correct. We go through this all the time. We look at a hundred deals and barely any of them work, not because they're not good deals, it's just because the way that the investor setup is you got to have a targeted at least 18% return, IRR, to be able to make this thing attractive enough because let's face it, hospitality is more risky than other asset classes. And so a lot of deals don't work. And then there's the pressure to perform. Black Swan events could occur. There's a lot of things that go into a scenario that I can relate to what you're describing when you're like, look, I want to build this really cool thing and I don't want the extra pressure of having to perform for investor returns. Let me find a joint venture situation where it makes sense. And if someone's got that kind of capital, or maybe let's face it, uh, this is something where you had a limited number of partners, maybe it's two, three, or four partners, it's a small base, it's not like you got a hundred investors. Then this becomes realistic. You could take 3.5 and divide it by five people. And if you've got $700,000 per person that can invest, the benefit, the ratio of return on investment still remains the same.

Brandon Gore 37:41

It's exactly. And you still get the tax benefits. You still get to depreciate. The IRR was just killing me, the waterfall payouts. And uh like I said, when I went to Luke, he's like, Well, yeah, you don't really make any money for 10 years. They make a lot of money for 10 years, but you keep all this equity. And I'm like, but what's the point? What's the point if I have equity? I have 100% of nothing at that point.

Nathan St Cyr 38:03

Like, what uh that doesn't make any sense. No, bro, we feel your pain. We wrestle with this all the time. And look, our our investment arm of our company is called Malama Capital and rooted in the Hawaiian meaning of to protect and to preserve. So, like, we're underwriting all these hospitality assets with that thought in mind of like, okay, we're gonna be damn sure and we're gonna carry the weight of protecting investor returns first and foremost is a priority, but a lot of times that means we're really taking the back seat and it's much more of a a long-term, a long-term win for us. So I can hear what you're saying for sure.

Brandon Gore 38:40

Exactly. Another thing that we we did, and this was per Luke's advice, but I think it's great advice, just to protect me and the investor that comes in, is each unit when we run electrical, we're running 220 and setting it up so if we do have this horrible event that happens and the whole hospitality world shuts down again, these could all be sold as individual condos. They could each be sold because you could put a full kitchen, full bathroom, washer, dryer, even though we're not gonna have that to begin with. They're set up that worst case scenario, these could all be sold individually. Because they're freestanding, 10 freestanding units are not connected. So there's that as well. That's like the backup, backup, backup safety plan, but it exists. So, worst case, we could still get out of this, and everybody gets their money back, and you don't have the long-term cash flow coming from it, but you didn't lose anything.

Michael Russell 39:31

Yeah, but look, you it's a lot easier. There's a lot larger pool of investors that could take down an individual property as opposed to a $17 million one. So when you think about an exit, I know you want to own this for forever, it's built out of rammed earth and it can last a thousand years, and I get that. But look, man, if $17 million is what you're looking to exit, and then you could go and maybe bump that up by 30% and you split that 50 50, could you go live a nice life with $10 million in cash?

Brandon Gore 40:00

Dude, so I I I've lived through a lot of different things. I lived through the crash in Phoenix when the housing market crashed. My house went from 350,000 to 35,000 overnight. I had a brand new Porsche, a brand new BMW motorcycle. I sold everything. I lived in my shop. I moved out of my house. I moved into my shop. I built a loft, and I was as broke as somebody could be, and I was the happiest I ever was in my life. I thought going into that, this is gonna be the worst point of my life. And I went to the gym every day and I hiked every day and I drank green smoothies every day, and it was amazing. Then there was another moment in my life where I sold an asset and in my bank account I had over a million dollars. And I thought that's gonna make me feel a certain way. I didn't feel any different way. I felt exactly the same. And I realized that it didn't matter what was in my account, my life was my life. And so let's say somebody came in and said, dude, I'll give you 17 million. I wouldn't take it. I don't care because it doesn't change nothing changes. The the numbers in your account change nothing. So I'm building this to cash flow, obviously. I'm building this to be profitable. I'm building this, building this to pay bills and to have retirement at some point in my life. But I don't care about winning the game of having the most money in my account when I die.

Nathan St Cyr 41:09

No, that's important though. That's like having an aligned identity with knowing what you want and not having to justify what you want to anyone else. You don't need to make sense of it. It's like this is what I know that I want, and I'm gonna go create a life that aligns with that identity, and that's it. It doesn't matter. It doesn't matter what anybody else thinks, feels, but it sounds like you've got a real strong level of clarity with what that is. And that's that's a powerful place to be no matter what in life, because typically that's gonna lead to happiness and joy. You really can't put a price tag on that. Yeah.

Brandon Gore 41:47

Well, like I said, we've modeled the financials, and this per each 50% equity owner in this will yield about $525,000, $550,000 a year income per equity owner. I can live happily on that, dude. I don't need more than that. If I make $500,000 or $700,000, or if I make a million, nothing changes. My life is the same. I do not care. So yeah, that's where I'm at in life, is I'm building this because it's a legacy project. It's something I'm passionate about, it's something that I want to do for my kids and my grandkids. I'm 46. I probably have 15 more years in me of actually being able to do the construction to like build the walls, to frame, do all the construction. Maybe 15 years. That's not very much time. I was 21 yesterday. Literally. It felt like I was 21 yesterday and I'm 46 today. I got a haircut today. It was all gray when he was cutting my hair. You know, where did the time go? So I want to build something that leaves my mark on this earth and that my my great-great-grandkids are proud of. That's why I want to do this. And obviously, when I get older and I can't build walls anymore, then it's paying the bills.

Michael Russell 42:51

Yeah, that's good stuff. Man, that hey, I appreciate you pushing back a little bit because here I am, I'm I'm peppering you with questions about the financial stuff. And you're like, you're answering them. But at the same token, you're circling back with, well, what's the meaning behind all of this? Like the the money is not just that's not the whole vision.

Brandon Gore 43:07

Well, if money was the vision, this is where it the I won't say the integrity of the project comes into play, but it kind of does. The easiest thing to do would be to do prefab cabins. There's a ton of amazing prefab cabin companies out there. Fritz tiny homes, one of my favorite. They're up in Canada. It'd be so easy to put a well in, to put footings in, and bring these cabins, and in six months we could be cash flowing. And we wouldn't be at 600 ADR, but we could be at 350, 400 ADR and still be 80% occupancy. And that would be great. But what do I have a show for in 20 years? You drive by these 20-year-old prefab cabins, that's not a legacy. So I'd rather do it the hard way, which this is the hard way, but build something that literally lasts forever and speaks to a different clientele. The Fritz Tiny Homes, again, that's gonna speak to a certain demographic, but what I'm building is gonna speak to even higher demographic than that, as far as what they consider to be luxury. And that's who I'm building this for, is for that client. Somebody that's in their 40s or 50s, loves mountain biking, loves good whiskey, loves sitting by a fire, and appreciates quality. I'm looking for me. I'm looking to build something that I would be like, dude, I want to stay there. Like that place looks rad. So yeah.

Nathan St Cyr 44:13

Well, I love that. And on another note, if you do find a property nearby, if you can connect me with the property and the Fritz, I really like the business model of the Fritz cabins. The six months up and running, and freaking I'll I'll take the $350 to $400. Yeah, yeah.

Brandon Gore 44:28

Have you seen Fritz? Have you seen their cabins? Oh my god, they're phenomenal.

Nathan St Cyr 44:32

Yeah, but I like that but you just rolled out a concept to me that sounded very attractive.

Brandon Gore 44:37

Yeah. No, it is. And it but that that's back to your point of if financials are your only reason, that's what I would do. If if this was just cash flow. So let me speak to that really, really quick. When I was first starting this, my wife, we were originally going to do a coffee shop on this property, decided not to do that, then decided to do rentals. And initially we were leaning towards the prefab cabins, but I kept saying, like, man, it just doesn't feel right to me. Like, this is such a phenomenal piece of property. It's a once-in-a-lifetime piece of property. We could do the Fritz Tiny Cabins on something 15 minutes out of town, but this piece of property across from the mountain bike trails, two minutes from Thorn Crown Chapel, three minutes from downtown Eureka Springs, we'll never get this again. We'll never have this. So we have a one, one chance to do this the right way. And I was gonna hire an architect out of Missouri, and he was an in one-tenth the price as Omar Gandhi. And Omar Gandhi gave me his price. It was 10 times more than the next other architect. And I was talking to my wife, and I was like, I just I can't really justify paying Omar this amount when you know these other architects are this. And she said, What's your reason? What's your why? And I said, My why is legacy. And she said, Don't let something as stupid as money get in the way of doing what you want to do. If that's what you want to do, if that's your purpose, that's your reason, then do it. I'm like, I love you. Like, you, you and me, like we can do this. So we went all in. She's like, if that is your why, then don't let money get in the way. And she was right. I could have gone, we could have hired an architect out of Springfield, Missouri, phenomenal architect, but it would have been, it only gotten exposure locally. We've already won an archetizer award for the design, and that even hasn't even been built yet. So Omar's design has already won an award, an architectural award. So once this thing comes to life, this will be a hotel that people travel from from all over the world just for the architecture because there's an Omar Gandhi design. It is that level. But that's the why. And it's the hard, it's the hard way to go. It's in some ways a stupid way to go because Fritz Tiny Homes and being operational in six months and cash flowing, that's a smart thing. Well, like, why don't you that? But I don't want to do it because in a hundred years that means nothing. When I build this in a hundred years, and a thousand yeah, it could literally stand a thousand years. There's rammed earth structures all around the world that are over a thousand years old. So this could still be standing. If there's a caretaker that's maintaining the roof, this thing could stand for a thousand years, and people could still be staying in this a thousand years from now. And that to me is immortality. That's your legacy.

Nathan St Cyr 46:59

Bro, I've awesome. Fucking love that, bro. Yeah, it's inspiring. It's inspiring. So that's a great human spirit right there, Br. Dude, I want to reach out and just freaking bear hug you, dude.

Michael Russell 47:11

Yeah. Where are you at right now with this, though? I mean, you're you're in the concept stage, you got the architect, but specifically with the partnership. Are you looking for a partner or like what where are you with the capital partnership part?

Brandon Gore 47:26

Well, so yeah, the architecture is done. I already have a team, I already have a construction team lined up, already have an operational team lined up. The land is owned outright, there's no debt on the land, there's no debt with the architect, he's paid in full, so we're all good with that. The construction budget's lined out, the construction schedule's lined out. I have been talking to my network and having conversations with some folks. I had a conversation a few days ago with somebody that is interested in selling his current business, which is very successful, and coming in and buying in that 50% share. He's considering that at the moment. But right now we're just in conversations. We've gotten some local exposure in Northwest Arkansas. I've had banks reaching out to me that want to fund the project. I met with a bank originally before we even had the design, and he came and walked the property and said, the day you bring me the application for the loan, I'll fund this project. So I know we can go that route, but like I said, I want to keep this debt free. So I don't want to do the traditional bank financing. So at this, at this time, we're ready to go. Like there's not a whole lot of groundwork left in front of us to start construction. It's just finding the right aligned partner. And at the end of the day, what I would like to do is find a strategic partner, somebody that brings value to the project besides the capital, somebody that wants to be a part of it and brings value in that way. So, and that could look like a lot of different things, but that's what I'm ultimately ultimately hopeful for if somebody comes along that's a good strategic partner.

Michael Russell 48:48

Well, hey, man, I I think you're onto something here. I'm really glad that we unpacked this. I wasn't sure how this conversation was going to go, but I feel like there were a ton of quality nuggets in here and a lot of things that are relatable that we're going through right now. We struggle with all the time with the aspects of raising capital and all that comes with it. And so I appreciate your honesty and you being you just your genuineness in terms of responding, like, hey, this is this is what I want, and this is how I'm gonna do it, and might not be perfect, might not be well what others would do, but this is the way I feel best about it. I I just I really connected with you in that regard. So thank you for being on the show. If our listeners want to follow your journey or learn more about your project, which is Outlier, where should they reach you?

Brandon Gore 49:34

Right down Instagram, Outlier Hotel on Instagram. You can follow us there. I have a website under development. I have somebody working on it. We're not, we haven't launched it yet, but we'll have a website up soon. And if you're interested, let me read you the legal jargon that my lawyer told me I could say. And he's gonna pull his hair out when he hears this interview because he's like, do not talk specifics. Uh, whatever. What do lawyers know? But here's what I can say. We're not publicly putting anything out there, but if someone listening feels aligned with what we're doing, we're always open to meaningful conversations. So there's the official statement. But like I said, I'm open to talking with folks and I'm getting interest from people that are reaching out, that want to have conversations, and that's great. And at the end of the day, it's just finding the right partner. That's more important. More important to me than money is the right partner. So somebody that is in it for the long haul and and like I said, hopefully brings value to the project.

Michael Russell 50:26

Well, don't be shocked if people reach out to you, man. We we've had a lot of folks on the show that have circled back with us afterwards and said, hey, wow, I've got a lot of business, I've got a lot of referrals or contacts. So hopefully this show will introduce you to someone that that aligns with what you're trying to do. And I really like what you've got going on. So I wish you the best of luck. We're gonna want to stay in touch and and follow your journey as well.

Brandon Gore 50:49

Awesome, man. Well, thank you. Thank you, thank you both for having me on. We would love the contact that you have with your best friend. Yeah. And Boise? Is that you're talking about? Yeah, yeah, dude. He is he is a phenomenal builder, one of the best builders I've ever known in my life. And so if you guys need anything built out there, he's the guy to talk to.

Michael Russell 51:06

Oh, heck yeah, sweet. Cool. Yeah, yeah. Sweet, right on. Okay, well, listeners, it's been another episode of the Hotel Investor Playbook. We are Mike and Nate. He is Brandon Gore. Don't forget to rate and review us. And we'll catch you again next week. Aloha.