Journey to Multifamily Millions

Overcoming Adversity to Build a Short-Term Rental Empire with George Salas, Ep 79

January 18, 2024 Tim Season 1 Episode 79
Journey to Multifamily Millions
Overcoming Adversity to Build a Short-Term Rental Empire with George Salas, Ep 79
Show Notes Transcript

Today's guest is George Salas, He is the CEO &  Founder of Empress Capital, a Real Estate Investment firm where he focuses on short-term rentals. He is also an inspirational speaker, fund manager, and short-term rental investing coach.

In this episode, George talks about how his upbringing in extreme poverty in Peru inspired him to pursue a profession in hospitality at first. Eventually, he made the move into real estate, losing money on his initial investment before succeeding in the market for short-term rentals.

He describes how his business turns mid-sized single-family homes into opulent rental properties and uses innovative financing techniques to set itself apart in the increasingly crowded market. He challenges investors to conduct due research and debunks the misconception that investing in the stock market is the safest and most reliable way to build long-term wealth.

Episode Topics

[00:48]  Meet our guest, George Salas
[03:25]  Venturing into Hospitality and Event Management
[08:33]  Success with Short-Term Rentals and Growth
[14:57]   Lessons from First Real Estate Investment
[23:46]  Understanding the Concept of True Diversification
[32:04]  Creating a Niche in Short-Term Rentals
[41:50]  What is one red flag every investor should look out for?
[42:32]  What is a myth about the real estate business?
[44:00]  Connecting to George

Notable Quotes

  • "My biggest lesson: do your due diligence when partnering, and my second lesson: diversify. Don't put all your eggs in one basket." -George Salas
  • "COVID was a wake-up call. Focusing too much on one area and not diversifying enough led to challenges."  -George Salas
  • "As a parent, instilling resilience in our children is a constant struggle. It's about challenging them, pushing them to overcome obstacles in sports, business, or any endeavor." - Tim Little
  • "Success in business starts with taking action. The initial steps may be tough, but the most powerful lessons are those really expensive ones." - Tim Little
  • "Everything happens to you, not just to you. Focus on what you've gained, not what's lost. Reflect on your growth a year from today, embracing the journey." - Tim Little
  • "I don't even buy a house with an HOA, let alone for business purposes because they can be very litigious, for the smallest things. So you don't even wanna mess with that." - Tim Little
  • "Rock bottom taught me resilience. In business, setbacks happen, but each one is a chance to come back stronger. Learn, adapt, and keep pushing. Failures are just stepping stones to success." - George Salas

Connect with  George Salas

👉 Connect with Tim

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[00:00:00] George Salas: Like the big change here in the journey was that. From the time that you start, when you launch a business, there's an era of you learning from your own mistakes, right? You either learn from your own mistakes or you hire someone to teach you. So you don't make those mistakes that are costly. So at the beginning of 2017, 18, for my first investments there, I learned from our mistakes, but the difference between that and today is that we actually pay to be in the rooms with high-level people who can really help us. Take us to the next level 

[00:01:09] Tim Little: Hello everyone. And welcome to the journey to multifamily millions. I'm your host founder and CEO of ZANA Investments, Tim Little. And on today's show, we have with us George Salas. George is the CEO and Founder of Empress Capital, a real estate investment firm where he focuses on short-term real estate. He is also an inspirational speaker fund manager and short-term rental investing coach George. Welcome to the show

[00:01:35] George Salas: Tim, brother, thank you for having me. It's an honor. It's a pleasure. I know we've been connecting here lately and I am looking forward to delivering a great some awesome nuggets to your audience today. Thanks for having me.

[00:01:46] Tim Little: Yeah, and there's no doubt in my mind that you're gonna do that I am also not worried about the energy level because you usually bring enough for everybody So that's going to be infectious on today's episode. I gave everyone a brief overview of your background But as on this show, we really try to dig into the details of how you got to where you are today. So please give us a little background on your journey and what you're up to.

[00:02:13] George Salas: Yeah, absolutely, brother. I'm gonna take us back all the way until I was sick. So that's okay. my journey really started when I was six, I was born in Peru and it's a very small town, right? And, at six years old, we were living in the capital Lima, and One day, my mom just walked me into our bedroom, my brother and I, and essentially said, George, we've got to go visit your grandmother, right? given I didn't know that my parents were getting a divorce, right? they got a divorce at six, and we, mom, myself, and my brother, moved to a very small town, back to the small town, right from the capital, and essentially moved into an adobe house. I grew up from Six to 15 in an adobe house where half of the house had collapsed, right? This is a place called Tarapoto in Peru, right? Very small city. And, and it's, what they call the jungle over there, right? It is essentially the valley, the Amazon side. And, we lifted one side of the house because, the roof was hot, opened up and we didn't have the money to fix it up. So the whole entire living area had collapsed in.

So that was me growing up, right? And essentially what we would do there would be play soccer on the streets and really just grow up very poor, right? Mom was a single mom and essentially was working very hard for us to be able to really, live and create the life, that she wanted for us. And, she ended up actually, remarrying and, essentially we, we were able to, move over here to the U.S. and, right before 2000. And essentially, we moved here, did no English or. Anything. fast forward a few years after that, I had gone into hospitality right now. We are privileged here in, the US as a lot of people talk about the American dream, right? A lot of people, don't have the opportunity to really create the life that they want for their families and for themselves, so for me it was a privilege being here, right? fast forward seven years, I had grown up a little into the hospitality, I entered the hospitality business. So I was working at restaurants, working in bars, and as I grew up, I ended up entering true hospitality. So I created. A marketing, business in a marketing company that would market events and it would market venues. So we would do this whole thing for 10 years. We were creating events and venues. so we would create the events. We will produce the events and we will host the events, right? Fast forward to about 2015, right? I'm seven, seven and a half years into this business. And I actually ended up, becoming an investor. So my first investment. Was as a limited partner as an LP, right? So I had invested into a. a new, nightclub slash, event venue, right? This is, from 2015 to 2017. Okay. And, we built it out. we ended up having a 1. 3 million, venue after that. And I had partnered with this gentleman who was the only GP in the deal. so take. Opening of the venue. We open up in 1. 3 million in debt. Now the venue's doing well. Fast forward two years after that, guess what happened to him? The entire venue had been shut down. Okay. And the reason for getting shut down was that the partner did not. Did not have the ability to renegotiate the lease from the past rent on that triple net lease. So the investors us, the entire partnership We lost everything that we had put into import two years, right? So now I'm not blaming this GP for doing that a lot of it was also Us not doing the proper due diligence. The biggest lesson here is to do your due diligence when you are partnering with anyone, when you're seeking out joint ventures, any kind of partnership when you're doing business with someone, that was my biggest, lesson that, My, my second lesson was, diversify. Don't put all your eggs in one basket. I was reading recently a book by Tony Robbins called money master the Game, and he goes to chapter five. I'm like. Wow, diversify your investments, and he goes with this one line, right? Diversify or die. So I'll never forget that one, right? So since then, right? We've I've been able to really wake up Out of that realm, of the industry, right? I realized that, after that one event, I had nothing, right? I was stuck on one investment, right? And then I had lost everything and that's what got me into real estate, right?  this is 2017, Tim, right? So 2017 came around the venue was shut down and then I lost everything I had. Now, I go from being a business owner and having my own group to opening up, saving, taking a lot of the, a lot of the saves that I had and investing it into this business to losing everything. So the next step for me was like, what am I going to do? Am I going to stay where I'm at or am I going to get up and work even harder, right? Am I going to get up and not stay where I'm at and go to the next level? So I started studying. I started taking, courses going to conferences reading books, and attending networking events so that I could. really learned what real estate was, right? four months later, I got my first real estate deal launched and fast forward a year after that, I had done. Over 25 deals. This is, single-family deals starting from, short-term rentals to fix and flips to wholesale deals, and by the end of that year, being my first year of real estate, I was just on the grind. when you're getting started, sometimes you just have to take action, right? It just moves forward and figures out that If this doesn't work, this will work. So for me, it was the journey of figuring out what in real state is really going to work. So I was testing out the fix and flip model, right? Which to me was like, okay, you've got to put quite a bit of capital. It fluctuates. You're speculating when you sell. it wasn't for me at the time, right? I needed cash flow, right? So then I went into wholesaling. You don't have to buy the property, right? You essentially are signing a contract and then that was cool, right? And then I went into short term else. So for me, it was Cashflow was the thing that I needed at the time, right? So rentals create cash flow. Yeah, right? So we would actually do, negotiate these leases with, multifamily business owners like yourself, right? We would negotiate leasing 5, or 10 units from them. And we would do this, the model is called rental arbitrage in the short-term rental industry, right? When you rent and then you sublease. So we would do, that's how we got started, right? So we would do that. And by the end of 2018, which is my first year, right? We had 10 short-term models by the end of 2019, we had about 36 or 37. Okay. So our growth was exponential in that year. Okay. And, by the time COVID hit, I had almost 38 or 39, And then three or four of those, Tim. We're houses, right? And the rest, 35 of them were apartments that we were renting or condos with one, or two bedrooms, and when COVID hit, for me, it was a wake-up call, right? my house has continued to perform, right? Unlike multifamily operators or long-term tenants, right? Long-term tenants were still paying the rent, but While that was happening for people that were traveling, 30, of my 35 apartments were within a two-mile radius of downtown Houston, Texas. So we had a sort of a ghost town for three to four weeks, and then this is when I realized that I was essential. You know putting the same one of the same mistakes that I made the first time that you know I made an investment. I was focusing too much on one area and I was not diversifying enough, right? So From there, we ended up actually realizing that what we needed to continue to thrive in this business even during covet was To go for the big dogs is what I call right? So what we realize is that the houses for us Are cash-flowing, right? While the apartments were a lot of them were breaking even and some of them were cash flowing but we had these two months during COVID-19, April and March of COVID, everything was shut down, right? So we put lots of effort in to be able to, continue to transition there, and fast forward a couple of years from there, we have changed our portfolio and converted our portfolio from lots of smaller units, more into mid-luxury, short-term metals. Our focus today. Is taking single-family-sized medium price single family residential short-term metals with built-in amenities and converting them into luxury short-term metals that Are well amenitized and create higher revenues, right? So and a little bit more info on that fast forward to Today, we've been able to really spend a lot of time dissecting the short-term vacation rental model, learning from our own mistakes, and, being able to build out not just a system, but also expanding our portfolio into doing, joint ventures into creating different types of partnerships. And then now we've launched a private equity fund, right? So our private equity fund is solely focused on short-term vacation rentals. And literally, we just went live about a month ago. and we're going to be investing in three to five different markets. We've got a pretty cool strategy when it comes to recession resistance, Tim. so we've created a recession resistance strategy. We can dive a little bit deeper into this as we go into interviews here. But, yeah, now I get to hang out with, great people like yourself. I'm surrounded, obviously, we've met in the race master mastermind. but, like the big change here in the journey was that. From the time that you start, when you launch a business, there, there's an era of you learning from your own mistakes, right? You either learn from your own mistakes or you hire someone to teach you. So you don't make those mistakes that are costly. So at the beginning of 2017, 18, for my first investments there, I learned from our mistakes, but the difference between that and today is that we actually pay to be in the rooms with high-level people who can really help us. Take us to the next level, right? And now I get to surround myself with people like yourself and I get to build out these, larger businesses, larger joint ventures. And, and then now we've got, an amazing business model here, man. So I hope that was a little bit of info on the journey for you, brother, for your people out there.

[00:13:03] Tim Little: Yeah, no, there's so much to cover. And I think just from the beginning, right? I think the theme that resonates for me is resilience, right? when you grow up in a rougher environment, you have to make do with what you have. there is no just giving up, right? Like you, you just get on and do what you have to do. And I think that builds a certain amount of resilience, in folks so that they can face challenges in the future. And that's something like as a parent that I'm always struggling to try to figure out what to do with my own daughters, right? Because. I wouldn't say they're spoiled and I try to do everything I can to make sure they're not spoiled, but I also want to challenge them, so that they build resiliency, make them do things that challenge themselves, whether that's, sports or business or anything else, something where they have to overcome in order to move forward. but it sounds like you got that naturally, growing up, and not dissimilar from my wife who, I wouldn't say she's super resilient in the same way. It's just that a lot of things just don't bother her. She is completely unfazed. And I think that's in part, too, to some of the things that she faced growing up. Because she was born in a Thai refugee camp, lived there until she was six, and then got sponsored. She and her family got sponsored and came to the U. S. when she was about six or seven years old. so I think all that stuff just makes us better people. it makes us better able to handle challenges as they come up. And anyone who's in commercial real estate right now is facing some challenges, most likely. and I've seen some operators who are not handling it. right there, they're almost hiding from it when this is a time when you need to face it head-on. And I think I got my resiliency primarily from the military, right? There is no I quit. It's you better figure it out and make it happen. And that's what a lot of folks are having to do right now. and then you talked about your time going into hospitality. And I'm sure that taught you all kinds of things just from interpersonal skills, right? Dealing with people, because it's just something you have to do in the hospitality Industry, which is always helpful right knowing how to deal with people But going into your actual real estate experience you talked about your first Deal essentially as a limited partner as an investor Be in this, club, this venue. I think that's pretty unusual because we don't hear about those kinds of deals as often, right? Sometimes we hear about it, whether it's short-term rentals apartment buildings, or storage units. we hear about being an LP on those kinds of deals a lot, at least in our circles. but we don't often hear about the more, unique. Real estate or businesses is really what they are like Tell me how you came upon that and how it was pitched to you, I guess when you first learned about it and you know Understood that you didn't do enough due diligence And I think a lot of us are guilty of that because we get excited by the opportunity but what was attractive about that deal? and made you willing to put, what I'm guessing was a significant amount of money for you at the time into that deal.

[00:16:19] George Salas: Yes, it was a lot of money 300, 000. yeah. first off in this industry, right? When you're there, it's maybe 2000 people in the industry. Everybody knows each other. It's like a small community, right? And then now you have the clients. That go into this community right meaning the fickle 500 people that frequent these venues and they all just travel around the hottest venues in town and they're in there are Maybe lawyers maybe dentists maybe, business owners maybe You know, whatever investors right who love to frequent these places. So The owners themselves know each other. It's very small, right? the deal came about from a business owner who actually was marketing his venue. To me, he's hey, I'm going to close this venue down, which should have been a red flag for me, right? And then I'm going to open up this other deal, and I need your help, right? While we were making him thousands of dollars every Tuesday and every Saturday. Then we, saw that we were making money. He saw that we had the funds and essentially this GP became our best friend, my best friend. So he became my best friend with, really not really my best friend, but he was faking it. So from there, I was able to, I didn't have any skills. Like I didn't have any investing skills and this is the biggest and probably the. The biggest and most, I would say the biggest and also the best mistake I've made because it didn't teach me, to lose or invest only. It also taught me that. I need to learn about this product before I go and dive super deep into it. I put all my eggs in one basket, right? it came out, it came about to me and it was, it was an upfront deal. And then I looked at it and I looked at it. I didn't know how to do my due diligence, right? So without the necessary skills, I went and pushed the trigger, but then it became a prolonged deal, right? It was late in launching. It was around. It was a lease. So it wasn't didn't even own the land. So at the end of the day, I ended up pulling the trigger And then we didn't open up until a year and a half two years later and it was a ground-up ground lease with the ground-up construction and we opened up in such a debt So it was the worst and the best deal worst because obviously I lost everything I had and had to save but best Because it sparked something right so after being in rock bottom After the deal got shut down, I realized that I needed to be better. And I couldn't stay where I'm at. So when you're out there and you've, you've gone through a tough time and whatever it is. for the people listening out there this happens to everybody guys, right? We all go through that so we just need to get our butts up and go work harder So I took it and it became a lesson right Tony Robbins says that bad times create strong people and Good times create weak people to me. I've gone through bad times. So that You know equals to what you said mentioned resilience, right? So Resilience is one of the keys to succeeding in business because you're going to have fall downs No matter what you just have to learn to get up harder and start jogging first, right? And then set up your mind or reset your mind and then go get that next goal Right and no matter what if you lose nine times, but you win one you've won, right? You've made it, right? Meaning if you go and try this business model, if you go and try that, like a lot of people fell on their first try, right? As a business owner, I'm sure you have, I have failed when I tried, right? So maybe my first deal, one or two didn't work out, but the fourth, the fifth, those worked out. And now you've got the resilience and the grit to be able to deal with them. And a lot of people, like you're saying, out right now, out there, they don't know what to do because what's happening in this market, It's something we don't see very often, right? Maybe every 10 years or so. So that was a little bit about the journey, on how we dealt with that deal, Tim.

[00:20:37] Tim Little: Yeah. And I think that's important and it's an important lesson for past investors or potential past investors. Cause in terms of success, like you said, in business, the first thing is taking action, right? You, if you don't do anything, then you can't get anywhere. but a lot of times when you take that first action, it's going to hurt, right? You may fall down, like you, this could have been devastating and a lot of people. Hey, this obviously isn't for me. I'm not going to, do anything related to real estate or passive investing or anything like that again. And then just go back to the safety and security of, the stock market or whatever it is. And, when I fought bought my first duplex and, within a couple of months I had a tenant move out, had to Fire my property manager, all those things piling up. I could have been like, you know what? This real estate thing, it's obviously not as good as it was made out to be. And it could have stopped right there. But like you said, you learn a lot of valuable lessons and you're like, okay, next time I'll do this next time I'll bet the property manager better next time. You know what I mean? And so you learn a lot of valuable lessons that will ultimately make you successful on deal number two, deal number three, and deal number four. whatever it is, going down the road. So I think that's great that one, you didn't just stop where you were. Cause again, that, that would have been a devastating loss for so many people, but you decided to say, all right, let's get back up and let's figure it out. Because obviously, as you said, you didn't educate yourself enough on that investment. And so you paid the price, both figuratively and literally. But that lesson I'm sure has stuck with you ever since and sometimes those are the most Powerful lessons are those really expensive ones.

[00:22:58] George Salas: I used to think Tim that this happened to me and I used to be angry. At this person for years, right? Then I realized that everything happens to you, right? Not to you. So it was, that's why I said the best. And I stuttered for a minute because I was like the worst and the best. Because if that didn't happen, we wouldn't be where we are today. And for me, I like to look at what I've gained instead of where I'm not or what I've lost, right? There's a book called The Gap in the Game, By Benjamin Hardy. I love that book because, before that book, I used to look at it, but I haven't made it yet. I'm not making a million dollars net every year yet. Or I'm not I don't have a hundred properties yet today. I look at it. a year from today I didn't have x two years from today. I didn't know XYZ, right? So I love that fact right? So a lot of us don't do that We live in this world where we're just looking at where we haven't gone yet or what we've lost and we live angry That was me for several years

[00:24:13] Tim Little: Yep. it's all about that shift in perspective You're absolutely right. and then another thing that you keyed on sorry was diversification and I think this is I was talking to Someone about this today, you know that hey, they're like, yeah, I wanna invest in real estate at some point so that I can diversify. And I think that's the issue, right? Most people are not diversified at all. They think that I have several different stocks, so therefore I am diversified. And as far as I'm concerned, that's a whole lot of. Different of the same thing, right? If you have a bunch of different colored eggs, you still have a basket full of eggs, even if some are brown, some are red and some are white. and they're all in one basket at that point. so I think. pieces of the education that I try to put out there are just, Hey, like you have the illusion of diversification right now, but you don't have true diversification until you go into other assets. and then even myself, I needed to remember, cause some people to go all in on real estate, That's it. Real estate or nothing. And those people are wrong too because real estate is still a single asset class and you have to diversify even within real estate, right? So a commercial multifamily, for example, right? there are so many different things. Even within commercial multifamily that you could do, you could diversify by, asset class, whether it's in a class apartment, B-class apartment, or C-class apartment, you can diversify by the sponsor, and while I would love everyone to invest with me and only me. I accept the fact that for their own benefit, they should be diversifying the sponsors that they're working with. That way, again, you have that diversification by the people who are, being stewards of your money. So there are so many opportunities, to diversify even within real estate. But again, just at least diversify because so many people are not diversified right now. And that is key to safety. From a financial standpoint, going into your background, you did what I hear a lot of people that come on this show do is they get into real estate and they try different aspects of it, right? Whether it's buying that single-family home and renting it out or going into fix and flip and then quickly realizing that it's one, a full-time job, but two, there are other challenges involved. you said a lot of upfront capital. and it's just very intensive in terms of what you have to do, to make those deals happen and to be successful. And then you talked about wholesaling, which is like the other end of the spectrum in terms of you don't need a whole lot of capital to get involved, but you still got to do a lot of legwork and really make those deals happen. so that could be challenging too. and then finally you settled on the short-term rental cause, you felt like that was a good balance. Yeah. I think what's interesting though is that you've since shifted. Now you specifically said that, when you started doing short-term rentals associated with apartment buildings, you were making deals with those owners. So my assumption is they always knew and it was always approved that those subleases were in place. Is that right?

[00:27:39] George Salas: Yeah. It wasn't a full master lease, but yes it was. leasing five to 10 units from each, owner. Yeah. And there were always disclosed disclosures in there. we disclosed that we were doing it, and they were completely okay with it. So my biggest mistake was having them all so close to each other. yeah, brother.

[00:27:58] Tim Little: Yeah. And I just say that as a point of caution for some people, because One of the challenges associated with short-term rentals is the lack of clear regulations associated with it, right? A lot of different cities and counties, even, are trying to figure out how to regulate short-term rentals, and some are doing a better job than others, and some are being onerous. In terms of the regulations, and sometimes it's just really confusing because it can vary from literally county to county or even, I've heard city to city in terms of what the regulations are. How do you deal with that? Is it just a matter of, going to the city or the county figuring out exactly what the rules and regulations are? Are there resources for that before you guys go into a market?

[00:28:57] George Salas: great question, Tim. Absolutely. So what we look at things based on. When we invest, when it comes to regulations, we essentially first look at the city allowance. you've got to look at the city level. and you're gonna look at the zoning that the city allows. then there are also smaller regulations within the HOAs. We don't like to go into HOA, HOA zone neighborhoods. So the majority of the properties that we purchase are either unrestricted or there are HOAs that allow that, right? today we don't purchase or we don't go into multifamily like we used to, but it's all single-family neighborhoods. And here, at least in Texas, there are unrestricted neighborhoods. when it comes to dealing with that now, we obviously are going to go into different markets. Once we get our acquisition teams going, right? So now, as far as that, we're going to go through the same process right now. Every city, whether it's a small, medium, or large city, right? Metropolitan City has a set of regulations and either in place or they're developing them or they don't have anything right? yeah. What we like to do is also diversify between cities that have strong regulations, which are already set in place. That way there's less supply because it's regulated. And in cities that don't have any, which there are a lot, the if her ones. The ones that are riskier are the ones that don't have any regulations, but they have them in place and they've created some because these are the newer markets. Let me give you an example. let's say the island of Galveston, Texas, right? Galveston, Texas already has permitting in place. And then not many of the neighborhoods in Galveston, Galveston have HOAs. So you can go in there, get a permit, and it's already regulated, right? It's not heavily regulated, right? But you could go in there and get a permit and you're completely fine. Now, let's fast forward to Dallas, Texas, who just essentially, the residential zoning just banned all short-term rentals in Dallas. In there, you can only go to commercially zoned areas. So we go to a market like Dallas, we will either be outside of Dallas, which is not very far. You drive 30 minutes outside of Dallas and you have other cities around it or inside the loop of commercially zoned areas, right? Now in those areas, you couldn't find too many single families, but you could find them right outside Dallas. So just a quick example to go through, how we're, how we're finding, how we're fighting regulations. Yeah, I don't want to fight Any cities or get into lawsuits. I've already been sued by an HOA back in 2019. So that's over for us so we we just take different measures to not make those mistakes again

[00:31:40] Tim Little: Yeah. And that makes a whole lot of sense, especially with the HOA aspect. I don't even buy a house with an HOA, let alone for business purposes because they can be very litigious, for the smallest things. so you don't even wanna mess with that. I, the other aspect that I always think about when it comes to short-term rentals is. Saturation, right? We see some of these markets that are like, tourist hotspots that just become saturated Over time, right? This doesn't happen overnight, but over time people rushed in to buy short-term rentals because it made sense, right? These are places that people want to go. People kept buying short-term rentals, and so it has this knock-on effect on everyone else to where there's this oversupply. Is that something that you've seen or you've run into, over the course of your business over several years?

[00:32:36] George Salas: 100 Okay, so Let me break down exactly What types of, like when it comes to categories, right? You have four main types, right? You have budget, you have economy, mid-luxury, and then you have luxury, right? And then you could categorize that in your budgets are going to be in the bottom 25 percent of revenue, just to give an example. Your economies are going to be in the bottom 25. Your mid-luxury going to be on the top 20,, the bottom 75 to right there, right? So between 50, you have your top 25 percent Most people when they start go and create a budget property, right? Whether it's because they purchased it and they just do furniture out there. That's what I did, right? So we could, whether you're doing it in any, no matter if you're doing it on the water, right? If you don't go and you don't create an environment of luxury, then you're going to compete as a commodity. What that means is that 80, to 90 percent of the properties out there are commodities. we specialize in not being a commodity or being a mid-sized property, but creating a luxury environment by providing the amenities that people want in that market. we know how to do the backend research. We know what people love. And it's different in every single market, right? So we're not going to go to Miami and then try to find a property with like pool hot tubs and views because the real estate's gonna be expensive over there You know you focus on something else maybe waterfront if we're in a mountain town, right? It's different. So it's different in every area So we essentially don't suffer that, you know at the beginning we did and for the last few years We've changed our model since COVID-19 going from budget properties to luxury right now We're not buying luxury real estate. It's a difference there tim when you buy a luxury real estate It's three to four five hundred dollars a square foot. We're buying medium price real estate and converting it Into a luxury rental short-term rental, right? Which now creates our own unique niche, right? So we will amenitize the properties. We make sure that we go into markets that have the demand for, bigger properties, right? And we create our own niches, which puts us in a completely separate category. Now, going back to the saturation part, this market is definitely saturated, but short-term rental markets are just like real estate markets, they are local, right? So as operators, we go into these markets analyze them, and figure out which markets have, some more economical or affordable pricing when it comes to real estate. And if these markets already have regulations in place, these are big reasons for us to look even further, right? Because we can find less supply. And more demand for the larger, amortized homes, right? So then we go in there and do our thing and now we've created our own niche, right? So that's how we approach, when it comes to, market selection or property selection, that's obviously one of the, one of the handful of very solid strategies that we do in our business model.

[00:35:55] Tim Little: Yeah, that makes a lot of sense. you're differentiating yourself and you're creating a higher barrier of entry for competition, right? Because if they want to play in that same category, then it's going to cost them and they're going to have to do the work. Whereas, at the budget level. Very low barrier of entry. anyone can go by fixer-upper and throw some furniture they found on Craigslist in there and call it a day. that makes a lot of sense. So we are running close to time, but I do want to ask you about the fund and, specifically for educating those passive investors who are considering getting into real estate, what are the unique advantages? To, invest in a fund specifically for short-term rentals and how our short-term rentals are funds different in either a better way or pros and cons associated.

[00:36:51] George Salas: I love the question. Thank you for asking that. So specifically when it comes to investing in a fund in short-term models. Your, our projections on cash returns are going to be higher than your normal. That's one of them, right? So now we invest in highly appreciating markets. Another one, right? And that's most short-term rental funds out there. Now, what's unique about ours is number one, that we're acquiring all of the majority of our properties. Within our portfolio is a creative finance acquisition strategy, right? So we buy a lot of them subject to the mortgage. We take over payments, and very low-interest rates, which, dissipates, a lot of the risk, right? Cause we're not going into, we're in a nine, nine, eight, 9 percent interest rate environment today, but we're buying properties at three, 4%, right? And we don't have to set up the financing because it's already in place. We're just taking over the financing. We have bought dozens of properties that way. So that's one. The other one is that we go for the niche, right? We go for that niche high-end look and delivery. So whether we're buying, three, or four bedrooms, sub-two, we still already know that we have to have certain amenities. within that property and then we enhance them. So we create a niche, we create what, what Alex Formosa says, like an irresistible house, right? Like something that, somebody can't say no to because they'll feel stupid not to rent it, not to buy it, right? So a great package. So all of our houses, we take that same, 100 million offer concept from Alex Hermosi from his book, right? I'm quoting his book, by the way, right? And then we apply it to our marketing. We create a property that is so beautiful in all aspects, right? and we deliver the best number three, we have a recession resistance strategy where we've gone and done historical Research and we've taken a list of the top 100 markets from 2007 to 12th, right that performed at a slow growth relative growth change, right? And our strategy behind that is called a relative change strategy, right? So essentially we take the sector of real estate, slow growth markets, instead of exponential, we take the same thing on the hospitality side, right? We take hospitality data. We merge them together and we take the ones that cross over meaning we're going safe on the real estate side We're going Safe and high performing on the short-term metal side That's our buy box in the middle and then we compare those data to today's metrics of revenue And how they are growing Year over a year with demand how the supply is growing how the revenue is growing on those markets And this is to the nitty gritty I'm talking about to the penny on how we've applied our research That's and the third point that makes us different right? So we've done hundreds and hundreds of hours of In-depth research and should be able to come up with that strategy altogether.

[00:40:03] Tim Little: Yeah, you're looking at that more macro-regional strategy and looking into all the fundamentals, the metrics there, that makes a lot of sense. And then it sounds I imagine that it's. CapEx intensive. If you're buying, like a B property, In a neighborhood and you're going to make it luxury. You got to put some money into creating those amenities where they didn't exist. before you're subject to, is that correct?

[00:40:31] George Salas: It could get CapEx intensive. Yes. where we have, what the property is, maybe has a pool and we have to add lots of amenities around the pool. Yes. but the advantage for us is that we're paying down payments of, we're putting down payments of 20, 30. And 40, 000 for these four or 500, 000 houses. So the CapEx, instead of putting it as a down payment, we're adding it and it's still coming in at a great, 12 to 15%, under repair value, right? Under LTV. so we're coming in and we're buying these properties with. Great. some, I would say good equity, right? we're also diversifying our strategy when it comes to investing, right? We're doing value at, we're doing sub twos with some cup packs. Not all of them need that high. not all of them need a hundred thousand. Some don't need any. and then we're also, we're going to be doing some retail purchases, maybe about 10 percent of our portfolio here.

[00:41:30] Tim Little: Yeah. And I think, obviously in this current interest rate environment, getting something with, creative financing like that is a huge advantage. no different, on the commercial multifamily side. if you're able to do a loan acquisition, right? same kind of deal because you're getting that loan rate as it existed, you know when they got it You're just doing it with the owner being the lender essentially. All right. this has been some awesome insight I love to dig into the details because I don't play in the short-term rental space as much So it's always awesome to have Someone who knows their stuff on here to educate me. but we do need to move on to the turbo round. So I'm going to ask you three questions that ask every guest that I have on the show. And I just asked for a quick, honest answer. Are you ready?

[00:42:18] George Salas: I'm ready. Let's go.

[00:42:20] Tim Little: All right, let's do it. What is one red flag that every investor should look out for?

[00:42:27] George Salas: Okay. That one, I think a generalist, right? Someone who does not specialize, right? An operator that does not specialize. And is a generalist, right? They're not specialized in one asset class, but they do everything in real estate, right? That means they're not masters of their craft, right? So you're commercial, right? I'm a short-term model, but there are some investors out there Hey, I do it all. And I was a generalist. So that's one thing.

[00:42:55] Tim Little: No, that's a good one. And I don't think anyone's actually mentioned that one on here. So kudos to you. All right, the next one. What is a myth about this business that you would like to set straight?

[00:43:07] George Salas: Let me think of that one. I'll say the stock market is the safest and most consistent way to invest for long-term wealth,

[00:43:16] Tim Little: Agreed. and you're going to hear it over and over again, if you're watching, CNBC, or Bloomberg or any of those, because I don't know, I feel like they're just, paid by special interests who are in the stock market. So it makes sense. But, I agree with you. I think that's a myth. And then it goes back to rule number one, which is to diversify. there's nothing wrong with the stock market inherently. but sometimes people use some, voodoo statistics to, talk about the returns over time. And it's yeah, but how would I have been invested for a hundred years? you're talking about an average over a hundred-year timeline. But that doesn't exactly match up for when I want to retire. doesn't help me a lot. All right. Final question. What does success look like to you?

[00:44:05] George Salas: Doing. Whatever I want, whenever I want, with whomever I want. That's what success looks like to me.

[00:44:15] Tim Little: Love it. That freedom piece, right? Time, freedom, financial freedom, all of it. All right. Hey, George, this has been awesome. I know I had a lot of fun. I hope you did too. And I hope the listeners did, please tell them how they can get ahold of you. And if there's anything else that you'd like to share.

[00:44:32] George Salas: Yeah, absolutely. you guys can get ahold of me at, George Salas 360. It's my social media website and I love to connect. so I've got all my socials in there. Yeah, that's it. And then as far as, something else, brother, it's been a pleasure here, being with you and then learning about what you do as well. So thank you for having me and I hope everybody out there got lots of value today.

[00:44:54] Tim Little: I'm sure they did. And we'll have all that contact information in the show notes. George, thanks again for coming on and I look forward to seeing you do big things on your journey to short-term rental millions.

[00:45:08] George Salas: Thank you, brother.