What It Really Takes to Buy Your First Hotel in 90 Days | Jacobo Hernandez E53

When most people say they want to buy a hotel, it’s just talk.

Jacobo Hernandez sold his entire $10M short-term rental portfolio, packed his car, and hit the road for 90 days to find one.

He toured 35 hotels, underwrote 2,000 deals, and slept in random motels across the U.S. before discovering a hidden gem, a 59-room hotel on 10 acres in Eureka Springs, Arkansas, for just $1.2 million.

Now he’s turning it into Forest Springs Hotel & Spa, a wellness-focused retreat with saunas, cold plunges, and outdoor cinemas funded by investors who believed in his vision.

In this episode, you’ll learn:

• The exact framework he used to identify hot markets and good deals
• How storytelling and video marketing helped him raise $2.5M+ in capital in weeks
• Why focusing on unique, experiential assets can help investors stand out and command higher ADRs

This episode is super interesting and shows what can happen when you go all in!

About Jacobo

Jacobo Hernandez is the founder and CEO of FreedomVest Capital and managing partner at The Vesta Group, where he specializes in transforming undervalued real estate into high-performing boutique hotels and short-term rentals. With expertise in acquisitions, revenue management, and digital marketing, Jacobo has built multimillion-dollar portfolios that merge design-driven hospitality with investor-focused returns. He’s also the author of Short-Term Rental Secrets, a guide to scaling and exiting rental portfolios through data, SEO, and systems. Passionate about education and impact, Jacobo now teaches entrepreneurs how to build scalable hospitality businesses that generate both financial freedom and exceptional guest experiences.

Connect with Jacobo

Website: https://thespringsretreat.space/

LinkedIn: https://www.linkedin.com/in/jacobo-hernandez-747299128/

Instagram: @_jacobohernandez_

Tiktok: @jacobohernandez_official

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

He spent months living out of hotels, working on opportunities that fell apart, and wondering if it was all worth it. But Jacobo Hernandez refused to quit. After 90 days on the road and thousands of underwrites, his determination led him to a 59-room hidden gym in Arkansas, a project that could redefine his career. This episode is a master class in determination and deal execution. 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.

Speaker 0:41

Get in the game.

Michael Russell 1:03

Today's guest, he has one of the most fascinating journeys that I've come across in a long time. And so I've been anticipating this interview for a while now. I'm excited to introduce Jacobo Hernandez. But before I do, I just want to give our listeners a quick overview of your career, Jacobo, so that you know they can understand where we're coming from here. But you started as an entrepreneur in college. You built and sold a seven-figure merchandise brand. Oh, you're selling uh items on Amazon. Then after that, you scaled a short-term rental portfolio in South Florida that reached over $10 million in assets before being acquired by a private equity fund. So pause there for a minute because look, you're a young man. Like you've accomplished a lot in a very short period of time here. So just the fact that a private equity company had enough confidence in you and what you developed to purchase, like to me, that is astonishing. Kudos to you. That said, what really caught my attention was your most recent move. So you literally packed up your car, you hit the road for 90 days, you had no home, you had no plan B, you were just visiting towns across the United States in search of the perfect hotel acquisition. And from what I understand, you were you under like 2,000 deals. You toured more than 35 hotels, and then ultimately you found the one, which is a 59-room property on nearly 10 acres in Eureka Springs, Arkansas. And so this deal, this is the deal that's transforming uh, I guess, your career arc here. It's called the Springs Retreat and Spa. And so I want to learn all about your perseverance, your creativity, your data-driven investing. So that kind of sets the stage here. Jacobo, welcome to the show, man. I am so excited to talk to you about how you found this deal, what's going on in Eureka Springs and what's next for this property. So, Jacobo, welcome to the show. That's quite an intro, Michael.

Jacobo Hernandez 3:01

I really appreciate it. Thanks for having me.

Michael Russell 3:04

Yes, sir. Okay, let's dive in. You mentioned that after about six months of, I guess, kind of behind the screen analyzing deals, you finally decided, hey, I'm gonna hit the road. And I love this. So just taking off that 90-day journey, some of the photos that you posted of what that experience was like, this really hits home for me because I feel like boots on the ground so often, that is the best way to uncover your gold, is just being there in person, knocking on doors. Um, so can you walk us through this? So, what triggered that decision to get off of the computer and boots on the ground?

Jacobo Hernandez 3:36

Yeah. So basically, as soon as I sold a short-term rental portfolio, I spent a couple months just trying to figure out like what I wanted to do next. And I was looking at, hey, I could go in and buy like a boring business using an SBA loan and then apply all the same digital marketing skills, SEO, listing optimization, pretty much everything I had honed during during both the e-com days and then the Airbnb days, until I stumbled upon boutique hotels. And immediately a light bulb went off. It's like, okay, this is the next level of short-term rental investing. This is commercial Airbnbs. Now you have a lot more doors, you have a lot more scale, all under one roof. You can force appreciation. It's easier to raise capital because you actually have a business plan that you can sell to an investor or where there's a model where you can actually refi out of these properties and scale them because they're valued like a business, though, which those were a lot of the limitations that I found during my short-term rental days. So we start. I basically had decided, okay, I'm gonna hire a team. I'm gonna build a team from scratch, like I've always done.

Michael Russell 4:36

Can I can I stop you there real quick? You said something that I I feel like I just I need to press into. You said I stumbled across hotels. So your your arc is you were coming from a business background, you understood technology and business mechanics. You had this really well-performing short-term rental portfolio, $10 million in assets, crushing it. And you're you're a young man, so you're you're you're proving your skills, but but being a young man, I think is an important distinction because you're now jumping into boutique hotels. I want to know how did you quote unquote stumble into hotels? And then what was that transition like as being young and in relative terms inexperienced? How did that impact you and your decision to dive into this?

Jacobo Hernandez 5:23

So, how how I stumbled upon it was just YouTube University. I actually found one of Blake's videos, Blake Daily, saw one of his videos and then immediately reached out to him. His mastermind was like 25k. I'm like, okay, here's my credit card. I'm in, because I've always learned that if you want to get something done in any industry, the first thing I do is just go and find whoever's doing it, and that's the shortcut to success. So immediately watch his course the first week and learnt everything from start to finish, which wasn't that different from all the short-term rental stuff. There were some minor tweaks more on like the acquisition side and and the waterfall with the prep for raising capital and learning all that. But I had a really good background from my short-term rental days because we we operated as well as a fund model.

Michael Russell 6:08

I guess the step up is like your transition from residential real estate, which short-term rentals, technically residential, into commercial. What was that transition like?

Jacobo Hernandez 6:18

There was a little bit of a learning curve again, all the the underwriting stuff, the capital raising stuff, but really it was it was it was pretty similar. It's just doing things at a bigger scale. And right around that time, I also stumbled upon the book by Steven, the founder of uh, I think it's BlackRock, What It Takes. Immediately I start reading that, and he's like, it takes just as much time to do a small deal than it does to do a big deal. And I think he was the first person to ever set up a billion dollar fund. So it's just thinking bigger and then really trusting that you're gonna figure it out along the way. There's gonna be mentors, resources, teachers for you to figure it out. So every time I want to get into a new industry, is what are my skills? Can I apply those? And if the answer is yes, then okay, that's a that's a good industry. I don't want to reinvent myself fully because from the Amazon days into short-term rentals, I applied the all the same stuff. We launch properties just like we launch products. So we use the same digital marketing skills, the SEO, the listing optimization. We actually launch our properties with influencers. So we have a lot of the tactical stuff. We understand how the Amazon A9 algorithm works, which is similar to the Airbnb algorithm. And then into boutique hotels, I was looking for the same things. It was like, I'm finding an industry where I can hone the same skills and apply them. And then whatever I need to learn, I'm seeking out those mentors or those courses. I also took a private equity commercial real estate course by Adventures Commercial Real Estate, I think it is, AE.cre. And they did all the financial modeling from scratch on how to build a waterfall, how to do the previous full underwriting model. And I just started building it from scratch because Blake provides his, but I'm like, I'm if I'm gonna raise capital and do this, like I need to be able to build my own model from scratch and not use somebody else's templates. So rebuilt that from scratch and then started building a team. So I hired um full-time acquisitions manager, somebody I usually hire and offshore a lot of talent because it's a lot cheaper. So I hired for $1,500 this person that had extensive real estate experience. He had worked for a multifamily company here in the U.S. He's Colombian, so he worked remotely, but he was like the numbers guy. He knew how to underwrite, how to model, how to put everything together. And uh I just hired him full time to hey, come come in. You're gonna underwrite as many deals as possible. We're gonna go on loop net, we're gonna go on CoStar. We're gonna download all of the hotels that are for sale. You're gonna pull that list, and then from there, we started building like this dashboard. So I'm very data driven, very process oriented. And we're gonna get into like how that also maybe kept me from buying a deal sooner because, like you said, it's not all in the numbers. It's also getting out in the field and actually checking out the markets and feeling the deals and stepping in those deals. And we were behind the computer underwriting for over six months, and we just couldn't find the right deals that made sense because we were downloading thousands of deals at the same time. And basically what we would do is we would analyze price per door, we would compare that to like the market ADR from CoStar, the occupancy, and immediately that would give us like the returns that we could expect from it by multiplying the number of units times the market ADR times the occupancy, it would give us an initial revenue, and then we would do 40% margin to get the NOI, and then we would set like a 10% cap rate, or depending on the market, whatever cap rate, that would give us an exit potential.

Michael Russell 9:37

Okay. So look, anytime you endeavor to pursue something, it starts with conception, then it starts with planning, and then there's execution, and you just kind of ran through all three of those very quickly. So, concept from the learning about this, like, hey, I've got experience with STRs, and you know what? Reading this awesome book gave me the confidence to feel like, well, why can't I scale up? Then you went and you started the planning stage, which I'll say the the research. So you, you know, you you purchased um education, whether it was a mastermind or it was the spreadsheet that gave you the ability. And then the the execution was you didn't just stop at the learning phase. You're like, okay, I'm gonna go hire someone who has the expertise to provide a shortcut so that I don't have to learn all of this. I can expedite this process. You systematically chose how you were going to streamline the process of evaluating deals in this stage of your pursuit. This is all from a computer. You hired a remote worker at a discounted rate relative to what someone would cost in the US, and you just started plugging through, but you had to simplify the metrics. So all of that data that you just basically just went through in short, is you were looking for ways to disqualify deals so that you could cut down on the noise because you only have so much bandwidth. So the quicker you can cut out deals that you know absolutely won't work, then the more time you have to focus on ones that have possibility. And so from from what I'm gathering, that was the first phase of execution is getting reps, analyzing deals, hundreds and hundreds and hundreds, maybe thousands, you know, over the course of a period of time. But then you took the next step in execution, which is to me the most inspiring part, which is going and touring the country. This this is what to me is like uh not everyone has the liberty and luxury to be able to just get on the road and pursue this, but some of our guests have talked about it, and it's been in a very for those that have the ability to do this, it's been a very effective method. So let's talk about where you tour. You you went to Florida, California, in the in the essence of like, okay, still going and visiting these properties is essentially you're also disqualifying properties. So, how did you disqualify those markets or those properties in Florida and elsewhere?

Jacobo Hernandez 11:56

So, from that funnel that we built, we built this dashboard and we probably had a hundred properties that we identified could work. And then I just we strategically then reviewed those market, and then I made an action plan or a travel plan to hit the states where we had most of the deals. And those ended up being Florida Um and then California. So again, I I at this point I was actually living in Columbia because after I'd sold my two companies, I just made a life lifestyle change and a move down there. Um, cost of living was much cheaper, and you can get a lot more bang for your buck there, um, get a full-time maid, and get a lot of the stuff delegated in your life so that I could focus on work. And I was thinking that was going to be the best move as soon as I sold. But then when I started this boutique hotel stuff, I realized, okay, I'm I probably need to go head back to the States and actually be in a hub like Miami where I can take a plane and fly out instead of having to go to from Columbia to the States and then to all these other places. So as soon as I made that decision, we packed our bags. I brought my girlfriend at that time, she's now my wife and our dog. We packed our bags and landed first here in Florida, started touring properties here in Florida. They didn't have enough space for us to do amenities, and I wasn't looking for just a deal. In our pipeline, we probably have a hundred deals that work based on the underwriting alone. If you're looking at just numbers, sure, tons of deals work. But it wasn't something that would excite me. Like I could take a motel, renovate the rooms, paint it, flip it, and call it a day. But I wanted something where I had space to do amenities, where I could do it experiential, where I could apply the same stuff we had done with our Airbnbs, which is the stuff that excites me, the wellness and the experiential stuff. And most deals in Florida, you're not gonna get that. It's just your hotel on a small piece of land. And if it does have land or if it's bigger, then you're talking about $300,000 a door. It was just hard to make numbers work in Florida. Insurance costs, also since there's so much new development. Now you have this old motel you're trying to renovate into a boutique and you're competing against these uh beachfront properties that are being built here in Florida. So it it was just hard to really make a deal work in Florida. So then from there went to California. It's an incredible market. There's tons of boutique markets like Palm Springs. We actually ended up touring a property there. It was a gay men's nude resort, but we we didn't know that at the time when we were touring it. The hotel was in operation and and we actually toured the property while it was in operating, which is a story for another day. You saw some scenery. I saw some scenery for sure, and you see a lot of crazy stuff in these deals. So started touring all over California, just driving around in a car, touring different deals. That deal we almost went under contract with. And again, these deals, it's like you're you move three steps forward, you feel like you're almost going to get it under contract, and then stuff stuff happens. Like it's it's always a thing. And this one, I guess, had some environmental stuff. We negotiated terms with the seller, and then he went cold. That property is now back on the market. Um, so we're we're seeing if we can get back under contract with that. But again, you move you move forward and you feel like you're progressing, and then you kind of enter in this like valley of of um of doom where you feel like is is this even going to be possible? Because we again we toured so many deals. Um, we also were looked at a castle in California. It was beautiful, lakefront property, 68,000 square feet, 68 rooms, and it was perfect. Like we could we could acquire this for pennies uh versus the replacement replacement cost, which that's another thing we look at is like what's the replacement cost of this building? What would it cost to build today? And buying stuff that's below replacement cost for me just makes a lot more sense than overpaying like some of these assets where people are buying it for two, three times of what it would cost to build today. That for me was important. We we found a lot of deals that that made a lot of sense like that. But then, for example, the castle that didn't have the right zoning, it was zoned as a school. Um, and we couldn't make that deal happen. So ultimately, we found this deal in in Eureka Springs, Arkansas.

Speaker 16:06

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 16:43

I want to dive in a little bit because there's some nuggets, there's some jewels in what you just said here. Now, from a mindset perspective, what you just kind of breeze through is not easy. Like when you get emotionally attached and invested in a property, like you're talking about wellness and you're talking about experiential. It's impossible to separate human emotion from that vision that you have. You get attached to executing it and making it come to life. And then when you hit things like in Palm Springs, issues with environmental challenges or the property itself has maybe zoning like the castle. It's really difficult sometimes to like take yourself out and have an objective perspective.

Jacobo Hernandez 17:23

And that that's the crux of a lot of people get emotionally attached. Well, let me unpack that then. If we want to expand on that story, because uh there's more than to it. So ended up staying two weeks near the castle, paying for hotels and Airbnbs, just floating around there, that area, trying to make the deal happen. I go and meet with the county. They charge me $500 to get on a pre-approval meeting with the fire inspections, a whole everybody's there. This meeting with like 30 people from the county, and they're giving me this long list of things, California style. You got to do environmental and you got to do a traffic study, and you got to do soil, and you know 50 things that were gonna cost over $300,000 and it would take more than a year. I talked to this attorney that had some political ties. I'm like, how can I make this deal happen? Like, this is the deal. I need this castle, like this is incredible. And I would still do that deal, by the way. It's it's still something I would pursue. But through all this journey from the castle, I'm like, okay, while I'm waiting for because all this stuff takes time. So now the county's like, okay, it's gonna take us 20 days to get back to. So I drive up to Mount Shasta and go into another deal. But I I toured probably 10 or 15 deals in California alone. So I'm driving from one end to the other end, to the other end, back and forth. And at that point, I did start getting pretty discouraged because you start looking at everything you're spending, you're checking in and out of hotels every single day, you're not working out, you're eating on the road. You you see it as this like magical journey of like, hey, he's out on the road for 90 days. I want to live his life. And when you're in that the journey itself and you're spending all this money, you don't have your routine, you can't meditate, you're on the road all the time, you're you're always drained because you got to figure out how to turn the hot water on the shower for every single bathroom that you're checking in, giving your credit card at every check-in, deposit, signing in, checking out. So it was mentally exhausting because I had put this challenge on myself. And I'm like, I need to get this done within 90 days. We've been underwriting for six months. Like, we're getting a deal done in these 90 days. It's it needs to happen.

Michael Russell 19:27

It's not as glamorous. You know, at the end you see the results, but you're right, putting in the hard work. I can relate, you know, I just been on the road a little bit away from my family, touring all these properties in Montana and in San Diego and just elsewhere and Denver. And it's like, golly, like it wears on you being in and out of hotels looking at properties. I am curious, real quick, before we fake we we move on to Eureka Springs. I just want to know, you know, we had Kara uh, I think it's Kara Weimer um on our podcast, and uh he had a pretty clear buy box because there's so many options. It's hard, of course, you're underwriting baby. On the financial metrics, but do you have a pretty clear, concise buy box? Are you looking for properties that are within a certain geographic zone or have certain amenities?

Jacobo Hernandez 20:09

So let let me let me read you my crystal clear vision for hotel acquisition. So our strategy focuses on rib repositioning 30 to 80 key motels, inns, and boutique style properties located within two to three hour drive from major metros with more than two million residents. We prioritize coastal and mountain lake leisure markets that offer year-round demand drivers, hiking, fishing, festivals, wellness, vibrant small-town culture, ensuring strong and diversified guest appeal. We seek assets with land for amenities, wedding event venues, and experiential spaces, and favor waterfront or nature adjacent properties that elevate guest experiences while increasing long-term value. We target acquisitions at a minimum 30% discount to projected stabilized NOI, typically below replacement cost. Exceptions are going to be made for prime waterfront assets, unique architecture, or large land parcels. We are willing to pay a premium for irreplaceable positioning. And our value adds approach centers on transformational repositioning, converting underperforming motels into design-driven mid-scale to upper scale experiential boutique hotels by adding wellness-inspired amenities, curated design, and strong branding. We create destinations that resonate with couples, family, retreat groups, wedding event, travelers. So that's kind of like our crystal clear acquisition buy box that we also will match against the underwriting. So love that.

Michael Russell 21:37

Crystal clear. That's great. So let's supply this then. You're in Florida, you're in California, you're touring these properties, you're having this feeling of, you know, it's it's not as glamorous. It's wearing on you. How does Eureka Springs come into your orbit? What was the this is it moment?

Jacobo Hernandez 21:55

I actually flew back from California and I'm like, I need to just regroup for a week or two. So I flew back to Miami, which was my hometown before I ever left to Columbia. And I'm just just yeah, a little bit this like disappointed. I'm like, uh, like, what am I gonna do? The castle stuff is still progressing. This is gonna take a while. This is a two-year thing. If we're gonna make that happen, it feels more like a development project than something I can like materialize right now. So I'm like, okay, let me sit back down a couple hours, go back through our pipeline, see if maybe we have missed something in inside of our dashboard and and see if maybe there's a deal to be had inside of our current pipeline. And started doing some filters on our Google Sheet, and then I see this deal in Eureka Springs. Now I knew nothing about Eureka Springs at that point, but I looked at the numbers and I'm like, this is crazy. We could acquire 59 units on over 10 acres of land, and their asking price at that point was 1.4 million dollars. So I'm like 20,000 square feet, replacement cost of 20,000 square feet at say 250 a square foot. That's over 5 million dollars. So we're getting this at 20% of replacement cost. This is crazy. I need to go check out this market and see what it's about. I did a quick Google search. There was hiking, uh world-class mountain biking, multiple lakes, rivers, fishing. There was uh ATV Tours, Polaris, the downtown had all these shops. I'm like, wow, this looks really cool. So next day I buy a flight to Ventenville, which that's uh for anybody that knows that market, that's the headquarters of Walmart. So it's a market that's booming like crazy. I I land there, rent a car at the airport, and at first I drove around Ventenville, I saw these huge developments. So the Walmart uh family, their the Waltons are actually developing a 350-acre site for all their employees. So Ventabil is growing like crazy. What do you mean a 350-acre site for their employees for what? For living, living in housing, and it's like their own little city. They're developing their in Ventabil for like all Walmart employees. They're pretty much developing all of that area. They have this museum that Alice Walton opened. It's like a world-class museum. And you look at all the development going on, like all the residential stuff, all these brand new houses, like that's what you want to see in. And the Eureka Springs is like the backyard or the weekend getaway trip for the people in Ventabil, Kansas City, Little Rock. It's 40 minutes away from Branson, Missouri. Um, so that and Branson gets 9 million visitors a year. So it had a lot of the fundamentals. So I drove into Eureka Springs, and what my research showed, it was a market that again, it met those conditions. It's a market that has all these year-round things to do the hiking, fishing, the festivals, and it gets over close to a million visitors a year, so which is crazy because the town only has 2,000 people. And then the price per door we were getting it at uh was $20, $20,000 a door. So we actually were able to negotiate $1.2 million, 60% seller finance at 6.25% interest only payments for five years. So our monthly mortgage to the seller is just three thousand seven hundred and fifty bucks a month.

Michael Russell 25:05

My goodness. I I gotta stop there for a second. You said twenty thousand dollars a key. We're talking three grand in mortgage. You're you're buying this at what percentage of uh you said it's like a five million dollar replacement cost, so it's like twenty twenty percent of replacement costs. Yeah, this is incredible. So here's how I'm taking this like in order to be able to recognize that this is an opportunity, you got to kiss a lot of frogs, right? This is an incredible opportunity. I look at a lot of deals, I don't I don't come across deals that are $20,000 per key, 60 keys, basically 59 keys with with all these things. And in this Bentonville market, you're right. Actually, how close is it to Bentonville? It's it's it's it's 40, it's 40 45 minutes from Bentonville.

Jacobo Hernandez 25:46

Okay.

Michael Russell 25:48

And we have Brandon Gore on not too long ago. He's building that micro resort in the same region. And and not only did he speak really highly of it, but so what he was talking about, which was quite a surprise to me, he said, aside from the data, similar to what you're describing, there is a feeling or there's an aura, there is a sensibility that there is just liveliness and culture. You know, like you can see that there's population growth, but it's the intangibles. Like he described something that resonated with me is that there's people driving fancy cars, Porsches, and you know, other high-end cars. And it's like, okay, there's affluence that is coming to this. There is a certain level of amenity that people are craving to be in nature. The mountain biking is huge. And you can just tell that there's the all of the ingredients for a great wellness or experiential type destination that is evolving over the next few years. And you're just talking about how they're visiting Boots on the Ground. There's that sensibility that wow, I can see how affluent travelers seeking nature and a design for it experience that our model fits this area.

Jacobo Hernandez 26:52

Exactly. So I'm gonna I'm gonna go over a couple key details on the deal, and then we can go into the vision. Um, but so it gets it gets even even better from there. So we got we got the terms, we got the seller finance, mortgages super low, and the property as is is already doing $400,000 in revenue. So it's not a property with no income, it's a property that's fully operational. I slept there when I went a couple of times, super comfortable, rooms are in great shape. So we're not looking at a teardown. This is a running hotel with in-place income that has $400,000 in revenue selling for $1.2 million, and we were able to negotiate the seller finance, which is made the deal so much better. So on the unit economics or the fundamentals there, it was amazing. Now, driving around, what I identified was all these hotels were dated. There was not a single hotel in Eureka Springs that met the upper or mid-upper scale. There's one hotel called called the Crescent, it's the haunted hotel, which is the most haunted hotel in America or something like that. Their occupancy is like 90%, and they charge over $400 a night. So that immediately validated. I'm like, wow, like there's people coming to this market willing to pay $400 a night. This is booked all year round, and the hotel isn't even that nice. It's just because of the experience and the story behind it. But the rooms are not renovated, the bathrooms are old, and that's the only hotel in town that's kind of nice or boutique. There's the best western, uh, which has a conference room, and that stays packed all year round because it has the only conference room in town, and it's the only one that's a little bit nice. So I'm driving around, I'm seeing the demand, I'm seeing the two or three hotels that were nice booked, and then you see all these economy hotels sitting empty. So there's there's obviously all these all these economy that are hurting because nobody is looking for a place to sleep nowadays. Like people are seeking out these experiences. And the problem in Eureka Springs right now is the supply is dated, and there's a huge opportunity for us to come in and actually give the market what it's looking for. Because a lot of people are now designing to go into Eureka Springs and either stay in an Airbnb because they're nicer or um just drive back because the town is beautiful. It's called the Little Switzerland of America and it's winding streets, it's uh it's gorgeous. So some people are actually going there and then coming back because they just don't have the the accommodations for them. That's a good sign. So, what's the projected stabilized revenue and then target ADR once you launch this thing? So the crazy thing is at $151 a night and 60% occupancy gets us to an annual revenue of $1.85 million, which is crazy. We only need 60% occupancy and $150 a night to reach $1.8 million in revenue, which is insane.

Michael Russell 29:39

Yeah, that track that tracks.

Jacobo Hernandez 29:41

Yeah, it's uh it's because of the number of rooms, and that's very conservative. So we underwrote really conservative, um, because we know we'll be closer to 200, 250 a night, but just with that base case loan, um, we're hitting over 30% IRR and a 3x equity multiple for um our investors, and like the returns are just amazing. Like we're we'll be able to return all investor capital from cash flow alone between years three and four. So we don't even need to um wait for the exit before we return all capital back. Just a huge upside, and that's the type of deals we look for. It's where there's very little downside because again, our debt service is so low, we're buying it at a at a fraction of replacement cost. So all this stuff, why you see all these real estate operators get in trouble, which is mostly like they can't pay debt, they financed, uh they have way too much leverage, um, they bought at a price that's too high. Like you make your money in real estate when you buy, and that all that stuff, we basically de-reased the investment with that. And then again, our our ADR and our occupancy, we're underwriting at market rates for the mid-scale market, but we're gonna be in the in the upper scale um as soon as we do the the capex investment, which is significant. We're gonna be putting over two million dollars in renovations alone at this property. What was the motivation of this seller? Motivation of this seller, he bought it um like three, three, four years ago, didn't have much of a hospitality background. He sent his executive assistant to run the hotel. The guy is really old, he's like 70 something years old, knows nothing about marketing. When you check in, they give you this big key, like old school key to check in. They got no systems, no software. And of course, like I said, the they're doing $400,000 in revenue, but a lot of it's eaten up by payroll. So in the end, they're only making like $50K in NOI, and the owner just doesn't want to deal with this hotel anymore. That same executive assistant was the one that furnished the place. So he he was the interior designer. He was the one that took the photos with the Samsung and uploaded them online. So, of course, they're not doing well and they're competing with all these other economy hotels. Like we just said, there's tons of beds out there. The economy class is not doing well. However, for October, they just posted an $80,000 month, which is again in those conditions, it just shows that there's a huge opportunity there because they're nothing special. There's a they're just a bed and a pool and a place to sleep, but no amenities and no design, no systems, no technology.

Michael Russell 32:19

Yeah, so basically he's older, he's tired, he's inexperienced, and he's not making a ton of money. So, hey, if he can get some stable, you know, whatever, 40 grand a year.

Jacobo Hernandez 32:29

Exactly, versus his 50k, but passive fully. So he's gonna be making pretty much the same amount of money with no work from our seller finance payments.

Michael Russell 32:37

Well, yeah, I mean, if you drew this up like based on the ideal vision of what a good deal would look like, yeah, you're you're checking all the boxes here. So this is uh this is pretty cool. Uh what did what's the down payment again?

Jacobo Hernandez 32:49

We initially it was 440k to close, but after inspections and everything we did, ended up busting the seller back. And I'm like, hey, we're gonna need an equity reduction so that we can fix this, this, and this. I give them a long list. I basically took the PCA, made a long list of all the stuff that needed to be fixed, got quotes, and I'm like, hey, I'm not gonna give you 40% down. You're gonna reduce that to 30%, and that that's gonna free up 120 something KM capital. So it our cash to close now is only $330,000. Cool.

Michael Russell 33:21

Okay, so how much money are you raising for this deal? Let's go through all of that. What's the reno budget? How long is the reno gonna take?

Jacobo Hernandez 33:28

How the source and uses basically looks like it's debt, $840,000, which is 25% of the deal, and then equity, which is $2.4 million, that's 74% of the deal. So again, most of our money is actually equity instead of debt because everything's going for capex and improvements, and we're gonna be putting approximately $1.8, $1.9 million into the renovations, and then everything else is just for the closing costs, reserves, marketing, and of course the down payment.

Michael Russell 33:59

So that's an interesting, that's like a hybrid. You're you're raising debt, and then you've got equity investors. Now, who's got the um the interest in in debt? Well, the debt's the seller. Oh, oh, I'm sorry. Seller finance, yep. Talking about the raise. Okay, I got you. So aside from the seller financing, it's all equity. So you're raising for private investors, and that's how you're funding it. Right. And so you've got budgeted about $32,000 per key for your for your reno. And and how long did you say that's that's gonna take?

Jacobo Hernandez 34:27

So approximately we haven't in our underwriting that we're gonna be fully shut down for eight months. But right now, we um had a 1031 investor that came in with a $1.5 million check, and he needed his funds deployed by January 31st. Um, so speaking to our our project managers who's who are out of Kansas City, actually, our project managers ended up being our investors as well. And they were we're we're looking at working with multiple construction crews to try and get it done faster. So it might be it might be sooner, it might be six months if we really need to get it done to deploy the capital, then we're gonna just have to engage multiple construction crews or multiple GCs to get it done.

Michael Russell 35:10

All right. So you're still in the planning phase, you're working that all out. And and just to be clear, the third to two grand I just said, that's not a rental cost per key. That's all in that you know, you got to account for working capital. If you're shut down for eight months, then you're gonna have to fund the servicing of all the costs that are related to just holding the property.

Jacobo Hernandez 35:26

Well, and and and if we if we were to break it out, it would be like we're targeting the $670,000 for the interiors, so uh about 16 kid a door, and that includes the furnishing and decor upgrades, and then $632,000 for all the exterior stuff. So the pickleball courts, saunas, coal plunge, the jacuzzi's, the trail decks, the outdoor cinema experience, landscape and design, outdoor fireplace and the furniture, barbecue lounge area, meditation and yoga decks, the pool side cavanas, um, redoing the pool, right? And then we have obviously our deferred maintenance and HVAC electrical and plumbing upgrades, utility hookups and permitting and design. That's another 200k. So that's kind of like the full renovation scope.

Michael Russell 36:07

Yeah, and it makes sense. There's a lot that goes into this. And in your experience so far, I mean, obviously you start off on with the spreadsheet and then you get into it, you start getting the contractor bids. These things, look in the hotel business, you're not on budget unless you go over budget. Right? So, like, what are you experiencing with with that so far? What's the feedback from the contractors?

Jacobo Hernandez 36:27

So we've we started getting quotes, and our last meeting with our project manager yesterday was all right, let's start zoning in on the key amenities because we had a long list of amenities. And the good thing was I built that in knowing that I needed that cushion and that I'd rather list 40 amenities from the start and then budget for those, knowing that I would probably have to then cut to 15 because everything's just more expensive than you initially think. Any any little change like the utility hookup or plumbing or any anything in a hotel business and multiplied by the by the scale and the number of units can be a significant cost. If you're a thousand dollars a key in our in our um hotel, now we're looking at a 60k expense, right? So anything that small can be a major um budget deviation. What we're doing now is we're reviewing the quotes. We are we had different proposals from our design team on like the bathrooms. We could do like a full bathroom remodel with the tub and a shower and move all the plumbing. We're like scratch that. So we we we had the designer do three proposals for the bathrooms, and one's like lavish, one's walk-in shower, another one's like vinyl, another one's just resurface the tubs. And now what we're doing is we're getting quotes for all four, and then we'll decide the unit mix. Say we want to do a couple suite. Maybe we're willing to invest and do the full lavish bathroom for the couple suite, but then for another 30 units, we we might do just a walk-in shower, and then we might decide for like five or seven units to do resurface the tubs and just change the fixtures, right? So we're getting quotes for all four of those, and we have a full dashboard of the FF and E cost and materials. And again, we're comparing the different costs versus our budget and the variance. And what we started doing now is like, all right, let's zone in on what the critical amenities are that are actually going to drive the ADR instead of just spreading the budget across. Because I've seen this firsthand experience of like hotel operators that buy 130 unit hotel or bigger hotels, and they have this budget and they spread it all across everything. And then we look at the property, it's like, where did the budget go? And it's because it's spread out across everything instead of zoning in on some key areas and then going all in. So what I learned from seeing that, it's like, all right, let's actually overspend in some key amenities, which one of those it's the pool. So let's have the most lavish, outrageous pool with a waterfall system and fireplaces and decks and just something that's gonna pop so much that people are gonna pull their phone out. Because in the age of social media, you want your guests to be your own advocates, like uh, like your own marketing squad. Like you want your guests to do that for you and to tag you and everything. So we're spending a lot of money on our pool and making that like a center of center of it. We're gonna do um uh massive outdoor uh screen mirrored sauna in a hexagon shape, like outrageously expensive. It's 50k, but we're strategically deciding to invest and spend more than what other people would look at. Other people would look like, okay, buy the cheapest sauna and call it a day. No, we're gonna go for the most lavish sauna and it's and do less amenities, but just amenities that are gonna wow our guests and have them pull their phone out instead of spreading the budget. Like we want people the moment they walk in to be like, okay, this is the most incredible sauna I've been it. I've been in, and that's gonna be tucked inside the forest. You go through this little deck inside the forest, and it's gonna be in the middle of the forest, surrounded by trees with the coal plunge, with the merit sauna, and those. Are like the highlights that we're choosing, and we're gonna we're being very thoughtful about where where our budget goes, and that each of those is gonna be driving our nightly rate up instead of being something that people might not really notice. So that's kind of what we're we're we're using as a filter for our scope of work.

Michael Russell 40:17

Yeah, no, this is absolute gold. And I'm just gonna uh recap for my own sake, but you talked about essentially good, better, best scenarios. So when you spell out your budgeting, you know, ideally, depending on how everything shakes out, you've got a contingency plan that if if you have cost overruns in one area, then you can pivot in other areas to have lower expense, lower costs for some of these things that are less critical to the nature of what you're trying to create. So bathrooms, for example, there's a variety of uh classifications in which you can build those out. But you have been sprinkling along the way here this vision of saunas and pickleball. Can we just kind of maybe bring this thing home, like sammorize what is the vision for this property? If you were to describe to someone that is looking forward to staying at this hotel when it is built, what exactly are you providing? Craft this vision for us.

Jacobo Hernandez 41:08

So it's called the Forest Springs Hotel and Spa. And forest equals for rest. So that's our tagline. Forest equals for rest. This came from the inspiration that in Japan doctors prescribe time in the forest called forest bathing, shrin yoku to reduce stress, cortisol levels. I get there's all these studies, like scientifically proven studies that spending time in nature can actually help cure so many diseases, helps for stress, mood, everything, right? So based on that, we built our branding and we're targeting two different guest avatars. One is going to be couples, and we have we mapped out who this person is, her name, or the couple, how much they make, where are they from, where they're driving out from, their motivations, right? We built the guest avatar in full detail before we built the branding. Once we had the guest avatar, which is couples and then wellness seekers, then we built the brand. So our hotel is Forest Springs Hotel and Spa. And like I said, there's gonna be there's gonna be three pillars for rest, foreplay, for connection. And it all stems from that name. And the pillar number one, which is for rest, is gonna be cold points therapy, nordic saunas, Himalayan salt rooms, signature rituals, forest bathings, couple massages, and a lot more stuff. Then there's the foreplay pillar, pickleball courts, mini golf, hikes, outdoor games. Um, because we believe like healing also comes with play, and then for connection. So we're gonna have fireplaces for people to gather, the outdoor cinema inside of the forest, and then tons of romantic moments. So we built the brand based on those three pillars nature as a medicine, and it's basically like your journey back to balance begins at our retreat. So that's kind of like what we're we're going after. I love it.

Michael Russell 43:00

I love it. That's that's such a well-articulated vision for what you're trying to create. We had Steph Weber was on our podcast uh a while back, and she is a marketing expert, and similar to what you did, she started with her her guest avatar, like even named them. Like it is, let's say the Miller family, I think is what she named them. Like she knew exactly what they were looking forward to and what they were hoping to gain. And so having that clear vision, I I I can see it. I I know you've got a great website where you are showcasing the vision for this property and that you are still raising capital, I believe. So are are you fully funded on this deal?

Jacobo Hernandez 43:36

So I it I think we're only missing a couple hundred grand. We're uh at two point um two point two as of right now, and we're we already we still got like 20 to more days to close. So we weren't expecting to fill up the raise so quickly. We were thinking like, hey, we only need $400,000 to close. As long as we have like a million dollars in the account by the time we close, we're good because we can start renovations, we can then keep raising capital as we're renovating, we can take it in phases, we can go slower. But this just went so much faster than what went what we had originally projected, and there was so much investor interest that we're gonna be almost fully funded, if not fully funded by the time we close, which means we now have to go in and probably shut down the whole the hotel fully and begin doing the work a lot quicker because keeping the cash in the account is not the best use of funds. And things have shifted. Like every week I'm like, okay, now we have more money. This is the new plan. So every time I'm talking to the project manager, they're like, hey, like every week you come and now we have to go even faster. It's like you're you come, you raise more money, and now you're like, hey, now we need to start as soon as we close. Because before it's like, okay, we can take this in phases, we can do one building, keep everything running, and we'll keep raising capital. But again, I think the the there has been just so much investor interest for this deal that uh we didn't expect to to raise the money as fast as we did. Yeah, there's a lot happening all at once.

Michael Russell 44:55

You're juggling, you're you're you're playing a lot of roles. What has been the most effective way for you to raise this capital? How are people learning about this? What strategies or techniques are you using to market yourselves and the opportunity?

Jacobo Hernandez 45:10

So I think for our asset class, it's all very visual. It's all about the story. Instead of these uh long, boring decks, like maybe some other asset classes like multifamily. They're very numbers driven, they're very dry, but we have a really exciting asset class that people actually want to be involved in. So the first thing I did was before we got the property under contract, I actually toured the property and I had my uh my wife film me with uh the camera and my mic, and I'm just going over the vision. I'm walking and giving them a clear picture of like, hey, the pool, this is what we're gonna do, and we're gonna do this in the forest, we're gonna do the cinema. And I walked in the forest and I'm just pointing at the different places and showing my vision. Send that back to my marketing manager and my editor and using AI. She basically models out my vision, and we get this video out as soon as we went under contract. We start, I start texting it to all my friends, we post it on social media, and within that first week, we had raised a million dollars. And that came mostly from the people that I knew would be interested in this deal. I had started building a CRM, and all the people that had started asking me about my journey because I was posting on social media, so I had a lot of friends that were interested in my journey, following my journey, that had shown interest. I had a list of like a hundred people that I knew were warm leads that I should that I needed to reach out. So start building your list, start posting. Uh, the best thing or my advice is you don't want to be raising capital when you get the deal. You want to be raising capital before you need the capital. And obviously, you're not calling the capital, but you are, I would say, like hinting at the fact that you're gonna be raising and then showing your journey. So I've been posting on social media for the past year now, documenting my journey, showing that I'm on these trips, showing that I'm I'm touring deals, and people know what I do. The worst thing you want to do is like you call somebody out of the blue and be like, hey man, I I'm doing this gig and yeah, you want to invest. I don't need to do that. By the time I call somebody, they're asking me the details on like, hey, are you back from California and how was this deal? Like, they're invested in the journey. They've been seeing the journey, they've been seeing the hard work, they know what I'm about. I've met these people already for years through masterminds, and they're all they're they're a lot of them again. Uh the first million was a lot of my my network already. So that gave us the initial momentum that we needed. And then from there, we had uh our email list, which we had building, we we had been building for the past year, um, and um just connections. So a couple people made made intros to just some bigger check writers, and from there we had two investors that went in the portal. One committed 1.5, the other one committed a million, and so they were both in at the same time. Wait, are those guys committed two and a half million dollars between two investors? So I I had to tell the one million dollar guy that we had the other 1.5 million already signed the docs. So basically, turned the money away. Wow. I told yeah, I told both of them like, hey, uh like there's two, like whoever signs the PPM first will get the deal. And they knew two guys came in right around the same time. It's whoever signs first. And I I've learned through this process, don't count money until it's in the bank. People will back out, people will commit and then go cold. So race more than you need. That was always our munch. It was like, if we need two, we'll raise three. If we need three, we'll raise like you just keep raising until you don't have you can't count money that's not in the bank, even if they sign you. So so we're always raising, we're always raising until we have all the money. But again, it's been uh it's been hectic, it's been fun, it's been amazing. Um, another thing I would say on the capital raising side, it's um do a short deck, seven pages max, very visual, make it really punchy. And then at the bottom, have a link to your calendarly, and I automate it so that the calendarly will send them automatically the long form deck to expand before we get on the investor call. So we have a longer deck, that one has sources and uses and all this stuff, but you don't want to have that in your initial deck before you they even show interest. So short deck with the with the two-minute video that we made, that they get the vision immediately. If they're interested to learn more, they book a call. And then in that call, they're gonna get the long deck before they get on a call with me and a link to a webinar that we recorded. By the time they get on the call, they're either pretty much sold um or they're not. So it really is just a matter of like answering their questions and and you'll know immediately and just go for the ask.

Michael Russell 49:42

Well, yeah, I mean, there's a look, there's a lot that you we could dive into. You could do a masterclass on capital raising alone. So I I don't want to simplify it as simply as like, oh, you just throw a deck up there and they're either in or they're not. No, I mean there's there's some nuance to it, but what your point is is look, start early, raise capital from friends and family, ask for introductions, publicize what you're doing so that people already are familiar with your journey. So it's not so much of a shock like you're doing what? You're buying a hotel. I thought you had Airbnbs, like, you know, whatever, right? So all of that rings home, like that makes sense. Like, like that's all good stuff. When do you close on this bad boy? October 24th. Okay, so right around the corner. I'm curious before we we wrap this up, what's your vision? Like like long term, let's say over the next five years, is the big picture to continue to build a brand of wellness resorts? What what what do you see is in the cards for you?

Jacobo Hernandez 50:32

So I want to get every time even more unique, even more experiential, and even more like kick ass. Like I've kind of like what um is it Isaac French, do do less but better. Um, and just do these deals that are irreplaceable, irreplaceable. Um, and I want to just do deals that really excite me that and I think that also helps you raise capital. And it it helps you stand out from and instead of getting buried by all these other 50 deals that are constantly being pitched online or of this multifamily or this rundown motel, the more unique you go, then and the more aligned with like the wellness and your whatever your your own vision and your authentic vision is, then you find people that are aligned. Like a lot of my investors are investing because they love the wellness aspect, they love what we're about. So maybe not trying to appease everybody and just being like a boring asset for everybody, but being one that stands out, like we're not for everybody, we're not your regular deal. Like we stand for something and like really lean into it. And I just want to do more deals like this and cooler, bigger. Like I want to do the castle, and I want to just do stuff that are like holy shit, like this guy's doing um like big stuff, you know, like or unique stuff. And that's that's what excites me and motivates me. And and the wellness aspect, I'm um, I'm I love spirituality. I just went to a seven-day Joe Dispensa event. So aligning that with what I'm building and and things I'm passionate about, I think that's where I want to focus my attention on.

Michael Russell 52:04

I love that. Yeah, well, humans are emotional beings, and you know, you could say, hey, we just invest on logic and financial return, but the reality is we want to feel good about what we're doing, and there is something captivating about the story that you're telling and the experience and feeling fulfilled. So I could see the vision, I see where you're going. This is a very exciting time for anyone that is scaling up from short-term rentals into the boutique hotel space like you are doing. And you are someone that I think is going to do some big things in this space. So, on that note, Jacobo, this has been an incredible conversation. And I think every listener will take away not just the tactical insights, but um a reminder of you know what it takes to bet on yourself, to stay patient, to find that perfect deal. So for anyone who wants to follow your journey or learn more about the springs retreat and spa, is that like did I did I get that right?

Jacobo Hernandez 52:59

Yeah, but the Forest Springs Hotel and Spa, we we rebranded from from when we started raising. But okay, yep. Where where should they go to connect with you? Yeah, so if they want to learn more about the deal, it's gonna be the springsretreat.space, and there they can download the investment deck. Um, and we'll we'll be in touch with them. But if they want to personally connect with me, see the journey, we're gonna be documenting and we're launching a docuseries on the process of Eureka Springs. So we're gonna be showing everything from the concept to the branding to the marketing to then once we start renovations, we're gonna share everything and we're gonna be doing weekly episodes on the journey. They can go on social media and and be part of this journey. We're gonna have um our own get or our own audience voting and polling, and we're gonna have we're gonna basically have everybody that's following us part of this journey. They can go to my personal social media, which is Jacobo Hernandez, and it's J-A-C-O-B-O. So it's Jacob, but with an O at the end. Hernandez. I've been calling you the wrong name this time. No, no, no. I mean, correct me, bro. No, so people call me all they call me Jacobo, Jacob, Jacobo. I've heard Jacoby. Um, so I'm I just I'm a man with many names. I can take all I could take on all of them.

Michael Russell 54:14

All right. Well, I appreciate you being patient with my ignorance, but Jacobo Hernandez, this has been great. I am Michael Russell signing off with another episode of the Hotel Investor Playbook, and we will catch you again next week. Aloha,