Why This Fund Ditched US Real Estate For 18% Appreciation In Portugal | Dan Daly E92

Speaker A: Dan Daly walked away from the $700 million auto empire he spent five years building right as it was about to sell. Now he runs a fund that invests in boutique hotels across Europe without ever buying the real estate. We get into how he underwrites a hotel in 10 seconds flat, why leasing beats owning, and how a 500k investment comes with European residency attached. The Hotel Investor Playbook, your guide to building wealth and freed freedom through hotel and hospitality ownership. Welcome back to the Hotel Investor Playbook. I am Michael Russell, founder of Malama Capital and your host. On this podcast, we talk story about everything you need to know to make money investing in hotels and hospitality assets. My guest today is Mr. Dan Daly and he runs a global investment company that invest in properties in Europe. And Dan, why don't you walk us through what exactly do you do and what makes this unique?

Speaker B: Yeah, sure. I'll give you a little bit of background. I spent over 20 years in the automotive industry and started dabbling in real estate. I'm going to say 30 years ago. I bought my first house and I borrowed $10,000 from my parents for down payment. And, uh, I went home after the closing and I looked at my account and I was like, negative $11.32. And that was my first real estate investment. And I still own that house. And it's been a short term rental, long term rental. It's been a great investment property. After 20 years in automotive, I said, you know, I really kind of want to get back into real estate. And I didn't really know what to focus on in the beginning. Might I tell you the truth? So I went down the rabbit hole of do I want to invest in commercial, industrial, residential, multifamily, single family, and spent a good 10, 12 months kind of figuring out, narrowing it down. What did I want to focus on ultimately that came to multifamily abroad in Europe. We can talk about all the different reasons why scaled a short uh, term rental property portfolio in Europe and now we're launching a Portugal golden Visa fund that is focused on investing in hospitality and tourism businesses. So the businesses that operate, manage and run those properties.

Speaker A: Great. So you touched upon a little bit about your history. So your background was in automotive sales. Right. Car dealerships. You started kind of on the ground floor and you worked your way up through management. I believe it was about a 20 year career. And your last endeavor was you built this company from around 5, 5 employees to this 9 dealership, $600 million, call it an empire within a very short period, I think it was under five years. And I guess I'm curious, right? So you helped to build this huge automotive sales business and then right as that group was prepared to sell, you walked away. Why?

Speaker B: Well, a couple different reasons. I go back to the beginning. I got involved in sales and what I learned really early on in automotive sales, number one, it's a super, super competitive business. And I started way back when with BMW. And if you were selling S, uh, over five series, every other BMW dealership had the same exact car. And often the same customer was shopping for the same car in different locations. So it was a really, really competitive environment that most salespeople and dealerships were relying on the cheapest price to earn their customer's business to get the best deal. And I kind of flipped that script a little bit and I learned from some of the really good guys that were doing it differently, which was, listen, provide a top tier, a customer experience for that customer when they come in. So don't meet their expectations, exceed expectations, give them a great experience, educate them about the product and you can charge more for that. So instead of racing to the bottom for price, race to the top for customer experience. So automotive is a hospitality business. So I've been in the hospitality business for almost 30 years and about six years ago I was hired by a startup group here in Southern California. They had one tiny little dealership, four or five employees, about 10 cars in stock. And I was hired to lead, build, structure, grow that group. And within five years we grew it to nine, 10 different dealerships, 100 million a year in annual revenue and 500 plus employees. So that, that's kind of like running a private equity fund. You're identifying an asset that's a great asset in a great location, but maybe is underperforming for some reason. And then you bring in your strategy in your playbook, you execute it, you roll it out and uh, that's how you grow profitability, very, very similar to the hotel industry. So I started seeing that alignment early on when I was with the automotive group, built it, grew it, wind up exiting out of that group and then said, I'm going to take that hospitality playbook that I've worked really hard on for the last 20, 25 years and implement that in short term rentals and hotel businesses. And that's how I got to where I am today.

Speaker A: Well, I guess I'm curious in the psychology of this. Here's the challenge I think a lot of people face is we get stuck in a channel or a direction and you work 20, 25 years in one industry. Yeah, you've drawn some similarity between the automotive sales business and hospitality, but really on the, I mean, they're very different businesses. And 20 to 25 years in, you decided to just completely take a different course. Walk me back through, like, how that felt, what were the emotions or what were the feelings? What was the reasoning behind making such a, uh, large pivot in your life?

Speaker B: Yeah, so that's a great question. To unpack it a little bit. I just didn't have that entrepreneurial itch to scratch anymore doing what I was doing. I mean, I was just ripping at Michael for five, six years, six days a week, 12, 13, 14 hours a day to build something and then got to a point where, okay, we weren't going to build, it was going to be an exit. And I was kind of like, all right, I'm, I'm a little bit, I hate to say the word, but I'm a little bit bored now. I want a new challenge. I want to do something different. And throughout my career, I always talk to our high net worth customers and what line of work are you in? What do you do? What's your professional career like? Real estate. Real estate. Real estate is what, you know, I've been hearing for 20 years. And for 20 years I always talked myself out of doing anything about it. I don't have enough money, I don't know anything about real estate. Prices are always going up. It's never the right time to buy. I always feel like I missed the buy point. So I kind of put all of that aside and said, listen, I'm going to, I'm going to really figure out what do I want to do next and why. So you talk about the emotional decision making process is, I'm a big, big fan of listening to your instinct and trusting your instinct. And for a long time I talked myself out of pivoting and staying with something because I was comfortable, I was good at it, I had done it for a long time. But one day the light bulb just went on. I just said, you know, it's, I want to try something different and if I don't try it now, I'll probably never do it. And I don't want to be that guy at the barbecue that says, you know, I, I could have bought that house in 1989 and now it's worth double and I could have bought it in 1995 and I passed that. We hear all these stories about everybody that talked themselves out of getting in and I did not want to Be that person. So, so I got in a lot

Speaker A: of times when people consider taking on risk, they associate with doing so when they have less to lose. When they're younger and at your stage in life, what would you say to someone who is maybe hesitant about making a transition, a major life transition, into something that is more entrepreneurial, that does involve more risk? Reflecting, uh, on your journey so far, what advice would you give someone who is considering making a move at the later stages of their life like you have done?

Speaker B: Yeah, that's a great question. Also, I would say it this way, for me, myself personally, I'm a lot wiser, smarter and uh, better decision making at 55 than I ever was, even close at 25, 35 and maybe even 45. So we're learning as we get older. So when are you really giving yourself the best chance to succeed at something new? Is it when you're in your 20s and you're learning and you're going to make all of those mistakes on your own and learn from them? Or is it as you've kind of built that book of things not to do over a 20 plus year career and you can hit the ground running and make decisions a lot quicker because you can say, I know what I'm going to do here based on experience in the past. So I think you have a much bigger competitive advantage, to be honest with you, making those big leaps later when you have a lot more life experience, you have a better network around you and you're just a little bit smarter than you were the year before.

Speaker A: Yeah, well look, you know, one of the most successful, if not the most successful businesses in America was, I don't say founded but really built by Ray Kroc. Right. He was 50 years old when he acquired an ownership interest in McDonald's. So sometimes when I think or I self talk about, hey, it's too late to start and I think about successful people like Ray Kroc, it really helps to. I think it complements what you just said that you've built upon life skills that help make better decisions. So I can appreciate that. I want to talk about your investment company, so your global investment partnership where you help people to invest in boutique European hospitality assets. That's what you do currently. But this all started when you made that pivot from your previous employment into wanting to invest in real estate. And you had an opportunity to evaluate all different types of real estate assets, whether it's multifamily or other various forms of commercial real estate. Why specifically did you choose hospitality and Then why did you choose to invest in Europe?

Speaker B: Yeah. So why hospitality? For me it was a real personal decision. And what I mean by that was what is going to motivate me to get up early in the morning, morning, stay up late at night and keep my wheels turning about how to build something, how to buy something, how to make it better. Did I want to have a, uh, 20 door apartment in the middle of downtown LA that is mailbox money. No, I didn't. Was the short answer right. It didn't kind of get me fired up. I wasn't interested in it. Forget about the dollars of it for a second. Just I, I broke it down to a real emotional, individual decision making process of what is something that's really going to interest me, what is something that I would invest in and see if anybody else is out there doing something similar. Okay. So for me, I love to travel around the world. I appreciate great hospitality from the car industry. I'm willing to pay more for a great experience in a great location. And I said, you know what? I've got X amount of dollars, I want to invest with somebody.

Speaker A: Let me go.

Speaker B: If I could see if I could find somebody that's got a hospitality and tourism fund that's investing in businesses abroad and creating a better experience for customers that are traveling. I couldn't find anything. So I said, interesting, this doesn't really exist. Why doesn't it exist? And is it something that I can build that others are interested in? And that's exactly where it pivoted to. So what we've done now is start a Portugal golden visa fund that invests in hospitality and tourism businesses in Europe. We can talk about why Europe. And nobody was doing that. I wanted to get into the hospitality and tourism business as an investor. I couldn't find any type of fund or investment company that was doing that specifically. So I just created what I was looking for and it's received tremendous feedback since then. The people start coming out of the woodwork. Oh my God. I've been looking for something like this for years and nobody was doing it. So I kind of looked where others really weren't looking and found a niche. I'm a fan of staying in one lane, if you can dominate that lane and really focus on it. So that's where hospitality and tourism came in. Then you talk about why Europe. I started looking in the US and New York, Miami, Los Angeles. Per square foot, just astronomical investment dollars needed to start investing in those type of properties. Eventually it took me over to Europe and per square foot versus you know, an LA, New York, Miami market, 70% less 30 year mortgage rate in Portugal, 3.5% versus 6.5% here in the U.S. so per square foot, dollars invested, return on investment, there was no comparison to what was happening in Europe versus what is happening in the U.S. and then real estate appreciation right in the U.S. i think 2025 averaged like 1.8%, just a little under um, 2% annual appreciation for just average properties. And in Europe it was, Portugal specifically was 18%. So the growth year over year was just astronomical. Cost per square footage was much less and to borrow money is much cheaper. So those three things just lined up and another light bulb moment. I said, wow, this is a lane that nobody's really kind of dominated yet. It's an area that is filled with opportunity and I'm going to make a run for it. So, you know, in 2021 we bought five or six properties, short term rental, started building up that portfolio, developed an ecosystem of accountants, lawyers, bookkeepers, property managers, general contractors, all from my laptop here in Los Angeles. Takes time, takes effort. You got to be disciplined. You got to find the right partners. You're not going to find them from day one. So you got to kind of work through that, finding the right partner. But now we have the same solid team for four plus years managing those properties and now we're scaling it up into something much bigger, which is a $20, uh, $5 million fund.

Speaker A: Yeah, I think that one of the. Well, there's, there's two things that come to mind when I think about investing internationally. Right. Number one, can you own the real estate? And number two, are you still able to take advantage of any of the tax benefits? Because obviously here in the US that is a huge advantage over other investment, investment asset types. And I would assume that that's not possible. Can you articulate how investing abroad compares to investing in the US in regards to those two components?

Speaker B: Yeah. So I have, I have yet to find a country where the specific real estate tax benefits are as beneficial as they are here in the us there's nobody else in the world that does it here like we do. Every five years. If you want to remortgage your house, providing that it's gone up in value, you can do that. That doesn't exist in Europe. But the counter side of that is, uh, you take Portugal, property values are increasing average of 17% year over year for the last five years. So if you pick the right location, and it's always about location, those property value increases far outweigh the tax benefits in the U.S. so there's balance counterbalance. Are the tax incentives as good abroad as they are here? No, but the property values are increasing much, much more dramatically there than they are here. It's cheaper to buy a property there. Cash flow can be better. Cost of entry is much cheaper for investors that don't have a tremendous amount of money to invest in properties. So there's advantages and disadvantages. At the end of the day, you have to just really decide where do I want to invest my money and why and does it make sense to what my specific goals and plans are?

Speaker A: Hey guys, if you're getting value out of this conversation, do me a Favor and take 30 seconds right now and leave me a review on Apple Podcast or Spotify. It literally takes half a minute, but it makes a huge difference in helping other hotel investors find the show. Okay, now back to the episode. All right, so let's walk me through this global investment partnership. How many properties, what markets? I guess where does this $25 million that you're looking to to raise, where does that fit into in terms of investment?

Speaker B: Yeah, so it's a great question. So short term rental properties, one and two bedroom units is what the portfolio started as. And we rol out over US tri state area, Portugal, Madeira, which is kind of like Europe's version of Hawaii. It's Portuguese island just off the coast of Spain and Africa and Andorra which is another independent country in the Pyrenees. So right in between Spain and France, it's a, ah, ski resort in the winters and it's hiking, boating, biking type of property location for spring and summer months. So we picked up really niche locations that are up and coming cities, so secondary cities. So in Portugal, rather than investing in Lisbon, we focused on Porto. Lisbon was overpriced based on what we wanted to do. So we looked at a secondary city. Kind of like if you were looking in New York, maybe you're not going to look at New York City, but you'll look at the suburban areas outside of it and go out from the center point there to find cheaper square footage properties that you're more interested in investing in. So we started building those short term rental properties since 2022 again, built that ecosystem, perfected that. And now what the fund does is the fund invests in operating companies that manage the boutique hotels. So this is a really important kind of pivot. So think of it this way. You're an investor, you invest in the fund. The fund is investing in the cash flowing. Part of the Business that runs the hotel. So if it's Michael Russell hospitality and tourism management company, you're staffing the hotel, you're managing the hotel, you're taking care of all the customer touch points, the booking, the communications, you are the face of the asset. Okay, so your business is what we're investing in and your business is what is generating the cash flow. The assets are completely separate. So it is not a real estate play, it's not a real estate investment. By Portugal's rules and regulations, in order to be eligible for the Golden Visa, which is permanent residency, you cannot invest directly in real estate. So what the fund does, it invests in the cash flowing vehicle of the business. You're investing in the operating hospitality company that is managing those properties, which is where all the cash flow generates. The properties are increasing in value, but that's long term. The cash flow is immediate. That's today. How many receipts do we have today? What's our average daily rate today? What's our booking percentage today? You're investing as an investor in the cash flowing, generating portion of those hospitality and tourism businesses, which to me was much more attractive. So you're not investing in real estate and waiting 10, 15 years to sell that property and make a return on your investment. The return is immediate based on the cash flow.

Speaker A: I see. So people are investing in a business, they don't own the real estate. Who owns the real estate in this case? Are you buying these properties or are you just leasing them from property owners in these areas where you want to run a hospitality business?

Speaker B: Yeah, that's a great, that's a great question. So there's a operating company and there's a property owning company that controls and owns the assets. They are two separate entities. So what the investor is investing in is the operating company that then has an agreement with the properties to run those properties for them. So it's a long term operating agreement between the two.

Speaker A: Sure. But at the end of the day, you're setting all of this up. Who actually owns the real estate? Are you, as the, I guess, aggregator of all these funds and you're the syndicator in this case, are you taking investment funds from investors and then going and buying real estate, or are you just setting up management lease agreements with property owners?

Speaker B: Correct. Management lease agreements with the property owners.

Speaker A: Correct. See, this fascinates me because I think that a lot of times people lose sight of the massive opportunity in running a business and the scale in which, how quickly you can scale your operations and the number of properties by leasing Most people associate investing in real estate by always having to buy the properties. But I've spoken with several folks, operators like yourself that are raising money for folks that just, they, they are comfortable with the returns of just having an ownership stake in the operations. The, the next kind of thought process though that I have is, okay, so if someone doesn't actually own a tangible real estate asset, they just own the business. What's their exit strategy? How do they get their money back? How do they actually receive the returns other than just annual cash flow? Where do they gain that equity Kick?

Speaker B: Yeah, that's great. So there's a couple of different points in there. Number one, I'm going to go back a little bit to where the whole idea came from in Autom of let's say you're driving a Land Rover. Yeah. And you bring it in for service. We're going to charge the customer $450 per hour for labor to work on your vehicle times four hours because it needed, whatever needed took four hours. So 450 times four, it cost us on average about $40 per hour for that technician. So you're Talking about a 400 plus dollar per hour profit cash flow after your cost of the labor. So the services business side of automotive is primarily where they make the most of their profits. It's not on selling the car. The car is the tangible asset, but it has the smallest margins in it. The most profitable margins are in the back end of the department, which is in the services part of it. And again, another light bulb moment for me. It was like, oh, this is really similar to the car is the real estate. And the operating company that manages the real estate is the technician that's working on the car. Here's our cost of labor. The cash flow is X and the investors get the dividend or the yield on the difference. That's right. Really where the profit margins are in the operating side because you generally have a flat cost of labor and you can charge more for a better experience. Right. So that kind of goes back to the whole thesis. And the second part of the question was, was what? Remind me you want to.

Speaker A: Well, I wanted to know how people get their money back. Right.

Speaker B: Okay. So how do you get. That's the most important part. Yeah. So you're getting your annual yield based on the cash flow. Exit is we've got 20, 25 of these 10 door properties. So 250 doors after five or six years that have an operating company managing them. And then the exit plan is to a group like Marriott or Hyatt that doesn't have those small boutique hotel businesses in one single platform managed by one single entity, where they see tremendous value in that because they don't have the resources to get boots on the ground to find those individual businesses. But after three, five, six years of creating those, now you have a platform. They're not individual multifamily units anymore. Now you have an entire hospitality and tourism platform that's being managed, being run and is cash flowing, which is very, very attractive. So the plan is to exit to one of the bigger hotels.

Speaker A: Yeah, I see. No, yeah, I love this. And look, if you're listening to this and you're going, gosh, I'd love to invest in hospitality, but I don't have the capital to go invest in a 10 million dollar asset. What you're describing here levels the entry because it lowers the bar here for a lot of folks. Um, I'm actually going through this exercise right now, so a couple things, little context here. I wanted to speak with a business broker. So I recently called one up and said, hey, look, I'm trying to evaluate what our business is worth. We've got, we've got real estate and we've got this operating business that spits out cash flow. We're trying to think over the next five to seven years, like, what is our exit? Where's our landing path? And so we had a conversation and he was describing, look, you're best off to compartmentalize the ownership of the real estate separately from the business and sell both independent of each other if possible. That is the ideal situation. And so in going through this exercise, what we realized is, look, they value our hospitality business based on the cash flows from that business and they weigh into it, well, what would a market rate lease be? And so they deduct the rental amounts from the cash flows, the earnings before income tax depreciate ebitda, and they ultimately determine evaluation based on, you know, a few different ways. Right, there's, there's two or three different ways, but let's say it's an earnings multiple. They just look at what your expected net earnings are after paying a lease and put assign a multiple to it based on the type of property and where it's located and so forth and so on. And so using a 3 to 4 multiple, like if I look, we're probably doing, uh, somewhere on the ballpark of $800,000 of NOI on a couple of properties. If we did a four times multiple, that's somewhere in the ballpark of 3.2, $3.5 million just for the business side. Forget that. The asset. And so what you're talking about is just scaled over a m. Much larger amount. There is real Runway here. But how does this relate to someone who's like, okay, great, what does this mean for me? There are tons of opportunities to be able to acquire under managed properties. By when I say acquire, I mean just the business. Okay, you can go in and there's people that, like myself, own the real estate and manage the business. And the play might be, hey, go find one of these property owners and say, look, are you tired? You want out? I'll take over the business. You hold on the real estate. I'll lease this from you. You can ret. Walk away and just own the real estate. I'll pay you a monthly mailbox money check to lease the property, and then you go and you scale and dramatically increase the revenue. And I think that's what you're doing. I'm excited. You could tell by my enthusiasm here, because this is one of the plays of hospitality that makes so much sense that I feel like people aren't really recognizing it's so different than every other type of real estate asset class out there, and that it's not just buying real estate, it's running a business. I think you've clued into that. But what I also recognize that is unique is you. You've identified markets in which costs are significantly lower here in the States. The challenge with hospitality is we're impacted by labor. Labor and, you know, inflationary costs are all squeezing margins. You mentioned that in Europe. And, and I know that your. Your margins are significantly better. Maybe you can touch upon what you're seeing from an operational perspective, how you're able to go and identify a property that is being poorly or not managed as efficiently as possible. What do you look for? And. And how do you underwrite value, add opportunity for the properties that you are ultimately leasing but then operating hospitality businesses for?

Speaker B: Yep. Uh, first of all, you explained the entire business thesis, like, spot on in 30 seconds. Right. So you get it because you're doing the same exact thing. Right. But you also said something interesting there, which was most people don't see it that way. Right. So that's the key to you doing what you're doing and me doing what I'm doing is we're doing something that most people don't see, which gives us a competitive advantage. Right. So you start there is. Look where others aren't looking. And that's what we're both doing. So it's exactly the same business model, just different part of the world. Right. As far as underwriting it, I like things really simple. I like to explain things at a 9th grade reading level so it's easily understood. And if it's any more difficult than that, I start to ask a lot of questions. So it's very simple. If there's a property that has a valuation of $1 million. Right. That property, if run efficiently, properly, should generate 12% of the acquisition price in annual revenue. Okay, so call it $120,000 a year. $1 million property should be doing anything that's in that 6 to 9% range. We know is an underperforming business. The assets in a great location, it's been refurbished, it's licensed, it's cash flowing, but they're not generating enough revenue. They're underperforming somewhere. So for us, I look at what's the cost of the acquisition and what's the percentage of annual revenue based on the acquisition price? That's it. And I know within 10 seconds if it's an opportunity or not. If somebody says, well, they're doing 12% annual revenue based on the acquisition price, I'm not interested. There's very little upside there for me that's left. Right. Because I know max is like, like 13, 14.

Speaker A: I see, okay. But I want to make sure I understand this correctly. There's revenue and then there's net income. That 12%, is that a figure that you're like a million dollar property? That's gross revenue. 100. So just over 100 grand? $112,000 doesn't seem like enough revenue. I guess I'm having a hard time understanding how you could allocate, let's say, a million dollars. You can make an acquisition and if it's only earning 12%. So you're saying, does that work? I don't understand. It doesn't make sense.

Speaker B: Yeah, it absolutely works. And here's why. Because your, your cost, your net out of that gross is close to 50%. So total revenue, let's call it $100,000 a year. You're, you're operating that hotel property at, uh, an EBITDA of 45 to. You don't have any added expenses other than your fixed expenses on an ongoing month. So 50% of what you're generating is pure profit to the bottom line, not 25 or 30%. 50%. 45 to 50%. They're all operating at. So all of a sudden you say, you know, maybe it's not that much gross revenue. But your entry point was very cheap, right? We're using million dollars as, as just an easy number. But out of that million dollars you're generating a hundred thousand in revenue. And 50% of that is pure profit to the bottom line. There are very few businesses that operate at a 50% of gross to the bottom line. So it's a very, very profitable company.

Speaker A: So since you're not acquiring the property, where, where does the million dollars come into play in this scenario? What is the purpose of that million dollars in the equation?

Speaker B: Well, you have to, you have to figure out if the property you're going to be managing is generating X amount of revenue based on the cost of the asset. Because you're still going to sign an agreement, right, to manage the asset for an ongoing term. So the best way to measure is it an underperforming property is how much revenue are they generating based on the assets value. So we're really underwriting the business, we're not underwriting the asset. That's the unique thing here. It's kind of like you said, uh, it before, it's. There are two separate businesses. So think of landscaping, right? If you wanted to go out and buy 10 landscaping businesses, you have the cost of the business that you underwrite and then you have the equipment.

Speaker A: Okay, I just understood, I thought that you were just straight up negotiating to lease from existing owners, but you're acquiring and paying an acquisition fee for the business, is that correct?

Speaker B: The property? Well, yes, we're signing a long term operating agreement with whoever owns the asset. It could be the property company as a whole or it could be the current owners.

Speaker A: Okay, um, I see. So my research tells me your fund is targeting existing boutique hotels. And these are ones that are valued somewhere between a million and a half to, let's call it $4 million somewhere in that range that are already refurbished. They're licensed, they're cash flowing. But maybe they're under managed. You explicitly avoid like the heavy reconstruction and the structural rehab stuff, which is such a painful process to go through. How do you really underwrite and value the human or the technological upside of an operating business rather than just like the real estate asset itself?

Speaker B: The upside is where are the expenses currently? So let's look at Michael Russell. He bought a property in 2022 and he had this dream of owning his own hotel in Portugal. Great. Spent two years and a lot of money refurbishing it, licensed it for short term rentals, then decided to get into the hospitality game and try and Run a hotel. Very, very difficult to run a business you've never done before. So we are finding a tremendous amount of opportunity in either scenarios like that, where people that have spent the time, money and energy in getting a property refurbished, licensed, and cash flowing, but then don't know how to run it, underperforming, or the other side of the baby boomers, people that have already refurbished their buildings, they've upkept them for the last 10, 15, 20 years. They're great businesses. The kids don't want to have anything to do with it. They want to get out of the business. We see those as opportunities because they've gradually been declining in cash flow and net profit over the last previous years because they've already been thinking about an exit. So the amount of deal flow and opportunities for those two types of target audiences, there's a tremendous market for those right now. How are we underwriting the business again? It goes back to a percentage of, you know, what's your average booking percentage per month, what's your average daily rate, and why are you leaking so much net profit? Where are your added expenses that you're not really managing? Well, people tend to look at expenses last instead of first, believe it or not, with a lot of the scenarios that we're seeing. So they're bleeding with double and triple expenses and things they don't need to. We already have a property management company that we've partnered with the last four years. So we take your asset, plug it into our existing platform, and from day one, it's more efficient and generating more cash flow.

Speaker A: Well, what are some specific examples of bottlenecks or cost inefficiencies that you can identify quickly and go ahead and fix?

Speaker B: A simple one. Cleaning fees. Well, we're not charging customers for the cleaning fee because we don't think it's fair. All right, well, why don't we think it's fair? Let's unpack that. And how much are we losing? Is it $35 per day? Is it $40 per day? You know, the next time you check out of a hotel, look at all of you have your daily rate, and then you have all of the fees associated on top of that. And you look at your bill and you said, you know, this isn't 500 night. It turned out to be $690 per night. What are these other expenses that are related? House cleaning is, is a very easy one. Parking is another easy one. Access to customer touch points is another easy one. So what are you not providing to your customers that you're not charging them for that. They would see value and you can, or what are you providing to them? That is an added expense that they would be willing to pay for. If you just said, Listen, there's a $25 per night cleaning fee because we clean the apartment before you got here and we clean it when you leave. Like it's a very easy conversation. But it's amazing how people are leaving 25 to $35 per night per door, per property, per year on the table. That is just found net profit. Yeah, day one. Right. So we, we take over a uh, 20 unit complex that's never done that. Now you've got 20 units per night, times if it's booked 310 nights per year. Tremendous amount of immediate cash flow to the bottom line. That was always there, but it was under managed and um, underperforming, so they never collected it.

Speaker A: Yeah, so you, you referenced that. Over time you've built a sophisticated team of professionals, you know, attorneys, accountants, et cetera. But, but boots on the ground operations, it can be an absolute nightmare. And if your value add is to go in there and run more efficiently, but you're sitting I don't know how many miles away in Los Angeles and your property's in some remote island off the coast of Africa that, like a Portuguese island. I think that's where Madeira sits. I mean the idea of running that remotely seems pretty scary. You, you seem pretty confident about the ability for you to do this. Can you maybe explain a little bit about how you've set up systems specific to operations that you can run remotely?

Speaker B: Yeah. So I think any successful business that wants to scale, it needs to be repeatable. There needs to be a, uh, built in need and the demand from the customer touchpoint. It needs to be hard for others to replicate and there needs to be an exit strategy at the end. Right. So how does, how does Starbucks operate? Thousands of points across the world with one CEO? You build a team and you build it slowly and you build it over time. You know, Starbucks is an example of something that started small mall and is now a global empire. And they only have one CEO and he lives 20 miles south of me. And I'm not saying that we're Starbucks, but Starbucks started a long time ago as a single point coffee shop and so did Walmart, and on and on and on. Right. So if you've been through a business before where you understand that being able to scale requires process that can be executed with the right people, then you can do it. If you don't understand what the process is or have the right people. You'll never be to. Able, able to scale. So that's.

Speaker A: Can you give me an example of the specific types of people that you hire and what processes you've put in place to audit and, you know, gain, gain trust and manage accountability despite the fact that you're, you're operating remotely?

Speaker B: Yeah, I think it's like hiring any other employee for any other business. Right. You go through your due diligence, you go through your interview process, you go through your reference process, you see what they've done, you see what they're doing, and then you're probably right 50% of the time. And then you have a partnership that gets off the ground and you begin it and you see how develop. So if I hire a new employee today, they go through the interview process, I hire them. Here's the way we do it. Let's measure your performance over 30, 60, 90 days. Have active communication that time to make sure we're aligned. We're on the, uh, same page, and we have the same goals and objectives, and we're constantly tracking towards it. So you find the right people, you implement the right process, and then there's accountability levels. Right. There's goals and objectives that have to be met on a daily, monthly, quarterly, annual basis. That keeps everybody on the same page rowing in the same direction.

Speaker A: Do you use any, um, accountability systems? For example, like eos, which is, I think stands for Entrepreneurial Operating System. Gino Wickman wrote this book called Traction. Many people are familiar with it. What kind of system do you use?

Speaker B: We don't use any system that is out of the box, if that's what you're referring to. Like a software platform other than HostKit. We get our reports from the booking agencies, whether it's VRVO or airbnb or booking. So we can see Air DNA is a great resource for us that we use all the time. What are similar properties in our immediate location? What are their average daily rates? What are they booking versus us? So we'll use that as a yardstick. Right. It's always best to measure what are our competitors doing versus us, and are we underperforming or overperforming versus them?

Speaker A: Yeah, I wasn't familiar with this before. We, we hired a business coach and he kind of implemented into our structure. Our team is having a system of accountability. And so really what it is is it's not software. It's just a. Assigning roles and responsibilities, and every single person has ownership of whatever role Responsibility that there's a way to hold. But I would imagine that you have some sort of virtual system of accountability to make sure that people that are boots on the ground are performing as, as they're expected to.

Speaker B: I'll tell you, the best measurement is your customer rating in any business. Pick up the phone, talk to your customer, talk to a guest who checked out a couple days before, send them a message. Hey, I, uh, just. Michael, I know you just checked out of one of our properties a couple of days ago. Just want to learn about your experience. If you can give me some feedback and let's just say, you know. You know, Dan, I was really disappointed with the booking, uh, process and it took your people on your side, you know, a half a day to get back to me. I expected a quicker return on that. It's giving me some information that I can say, okay, is this a one off or is this happening repeatedly? If it's happening repeatedly, it's a person or a process issue, you. Right. So very quickly, just by getting simple customer feedback, which is free and invaluable, to help you make your business better. It doesn't matter what your business is, your customer is always willing to tell you what's good about it and what's bad about it. Then it's up to us as the business owner to react to that. Okay, is this a one off or do we need to start changing some processes or some people?

Speaker A: Yeah. I want to talk a little bit about your golden visa opportunity. Obviously, investors have an interest in financial returns, but I think that you're appealing to another audience that, that there's layers of opportunity. Can you talk about who is interested in obtaining, I guess, this golden visa for European countries and what is the process for them to either obtain citizenship, kind of. What are the different layers of opportunity for someone that is investing in your fund?

Speaker B: Yeah, so Portugal's golden visa specifically is a permanent residency program. So the way the program works is an Investor must invest €500,000, which is about out $500,000, give or take, defending in an approved fund for a minimum of five years. And in return, once that process is completed, they get permanent residency for themselves, their spouse, their children, elderly dependents, if they happen to have them for Portugal indefinitely. So it's permanent residency card. It gives them free access to healthcare, education, you can travel freely throughout Europe without a visa to handle the Schengen countries. So all of these added benefits. So if you're an investor into the fund, you're getting this permanent residency card after five Years, provided you keep your money in there for five years, you're getting your annual yield off of the cash flow. You're getting the potential exit to the larger hotel group in a five year to eight year timeframe. So the upside is all of a sudden it's not just a hospitality and tourism play on an operating business. Yes, that's one part of it. The most important part is something they can't take back, which is permanent residency. If you've got that for yourself and your entire family and then you've got an exit strategy at the tail end of the fund. So it's, it's kind of three or four investments rolled into one. And it used to be one of those kind of, I'm going to call it a tactic used by ultra high net worth people behind the curtain. How does this, how does this person have permanent residency in another country? And are you telling me they can, they can move and live there and work there and go to school there and have access to health care anytime they want for themselves and their family? Yes, it's an option. It's an option that uh, ultra high net worth people have been using for a long time and now it's just becoming more available to, I'm going to say the retail investor. Right. It's, it's not behind the hidden curtain anymore. It's not just for ultra high net worth people. This is an average retail investment where people say, you know what, I would love to retire in Europe in eight years and the kids will be out of school and we can go over there and they can come visit because they're covered under it as well. It's about having options. It's not about leaving tomorrow. It's about what are my options for the future and am I planning now to have a goal and an objective for retirement in the future?

Speaker A: Yeah. Well, let's talk about your vision personally for the future. Flash forward five years from now. If you achieve your goal. What does life look like for you, both professionally and personally?

Speaker B: Yeah, professionally. I mean, every investor got the return that they were inspecting. Plus. Right. That's number one. Is, are we taking care of the investors? Was the fund successful and did we do something to overachieve what our already lofty goals were? So is, you want to make your investors happy, you want people to get exactly back what you promised them they were getting back and you want them to be happy and you want there to be the Fund two. So, you know, that's the idea is, is what will Fund 2 be like after Fund 1, so it'll be a successful fund. We're already verbally subscribed to about 40% of the 25 million. So once subscription period opens, we probably, you know, we'll probably be fully subscribed after 12 months rather than the full 24 months. And then we're already planning fun 2 after that. So it's. It's an exciting time to kind of roll out what we're doing here at the hospitality and tourism, and then, you know, see, in three to five years, what. What does the second act look like? Is it a bigger hospitality play? Is it different location? Is it, you know, resort level? Or is it something totally different? So that's kind of where we're looking right now.

Speaker A: Is there a dollar amount for you in terms of, I guess, value or property valuation, or is there a property quantity that you've set as a goal for yourself within the next five years?

Speaker B: No, is the short answer. So I didn't say, uh, I want to have X amount of properties generating X amount of dollars or this wasn't successful. I don't. I don't look at it that way. Is it, uh, am I leaving something behind that wasn't there before? Did I build something that didn't exist before that get people an opportunity to invest in something that nobody had created before? I. Again, to go back to the beginning, right? I was looking to invest in something that didn't exist. So now I'm creating something, and all of a sudden people are saying, I've been looking for that. I've been interested in that. It wasn't out there. So, you know, for me, the motivating factor is leaving something behind that wasn't there before and then figuring out what your next act is. If you asked me three years ago in automotive, would I be doing a Golden Visa Portuguese fund based on hospitality and tourism? I wasn't even thinking that. And here we are. So, you, uh, know, it kind of evolves into, how can I build this? How can I grow this? What's next level? And is there somebody already doing it? Or is it an opportunity to be in a real niche market where there aren't a lot of.

Speaker A: Yeah, well, they say the expression is there's riches and niches. Right. And I can't say that I've ever had anyone on that on the show that is focused on this Golden Visa investment, uh, investment program. It's really intriguing. So, Dan, I. I appreciate you being on the show. Last question. Where can the listeners follow your journey or get in touch with you?

Speaker B: Yeah, Best way is just on the website. So Global investment partnership is the company and the website is globaliplc.com and just send us an email and I'll get back to you. 10, 15 minutes and happy to have a conversation with anybody.

Speaker A: That's excellent. Well, listeners, thanks again for tuning in. This has been another episode of the hotel investor playbook. I am Michael Russell. He is Dan Daly. And we will catch you again next week. Uh, aloha.