This is one of our boutique hotels and it’s 20 units, I want to take a little stroll through the property and talk about how we bought it and how we run it. This is our second boutique hotel in South Lake Tahoe, California. And it’s just a few blocks away from the shores of Lake Tahoe, and two blocks away from a heavenly ski resort in the ski village. So it’s a prime location that has year-round demand, you’ve got the lake and then hiking and biking and camping in the summer. In the winter, you’ve also got skiing and snowmobiling, and snowboarding right by the mountain. So it stays this property stays pretty booked all year round.
So this deal came to me from actually one of my friends who he and his partner had hotels in the market and actually looked at this one, and they didn’t quite like it or didn’t like the number, so he sent it to me. And this is one that we could easily add to our operation, as we already owned another hotel just a couple blocks away, which had 14 units. So we could add this one to expand our operation, lower overhead or incremental overhead cost, and also hire out the additional team members that we needed to manage this thing and just become more efficient in the market. So it made a lot of sense for us to add another 20 units, even though it’s a little bit higher purchase price. We bought it for 3.4 million, which is about 170,000 a door a little bit higher than our other property. When the renovation was about to finish, we bought it from the owners who had the intent to renovate the place and then run it. However, during that whole process, they spent a lot more on the renovation. I think the rehab costs ballooned to over a million dollars. And it’s expected to be a lot lower a couple of 100,000. So we came in towards the end, finished out the electrical and plumbing, did the flooring and paint, and brought this place to what it needed to be able to rent in this market. Then we did all the furnishing plans. It matched up with the timing of the sellers, the lead coming from somebody I knew because I was telling people that I wanted to buy more in this market, and they knew what I wanted. So I think that’s a good point of making sure you’re telling people what you’re looking for. And that’ll bring opportunities to you. And then this one slid right in and it worked for us.
This is a limited-service boutique hotel. We don’t manage staff within the property, we put up a front desk for check-in, and we converted the office in the old managers unit into a space for our employees and for extra storage because there’s just not a whole lot of room on the property. And when we do snow removal in the winter, it kind of just piles up. So we needed that for extra storage. And also at our other hotel’s office, we don’t have a bathroom and hangout space for employees. We want to provide that with a full bathroom in there and the kitchen as their area to hang out in between the day and in between the turns as they’re doing their job. The property is limited service meaning, guests get in through an automated check-in. They receive automated messages with their check-in code, they receive instructions, and other guides before they get to the place. They can just come into their room and do a self-check-in. And we don’t need to have staff on-site to be able to check them in and all that kind of thing.
And then each room is just a bed, a desk, and a bathroom. Back here there’s the coffeemaker, the toaster, the microwave, and the mini fridge, then you got the TV and nightstand and a little thing for luggage juice. So there’s not a whole lot to the room as compared to our other hotels that have kitchenettes or full kitchens and a different unit mix. This is just like simple hotel rooms some with single beds, some with two beds, and a small area for an extra chair for seating. So it’s a much less amenity-rich experience for guests but the price also reflects that. We have enough rooms to still be able to do well to keep the rooms booked and it’s still a stylish and comfortable space.
Since the rooms have less to offer with the amenities inside them, we want to do a good job of the indoor-outdoor space. As you can see back there, it’s all covered in snow but we have an outdoor seating area, picnic tables, a fire pit, an outdoor couch, and string lights. In that way, guests are not confined in the room when it’s warm. Even before the outdoor area piles up with snow, people can hang out there by the fire and we have the grill area where they can cook. We have those amenities on the property to make it more appealing. The place also has mountain views and is covered by sequoia trees, which creates a nice environment. Those kinds of features bring in different people who also come for gaming and outdoor activities. And that makes us do pretty well.
This is the outdoor area that I was talking about that was just covered with snow right now it’s almost as tall as me but you can almost see our grill that’s covered by the snow under this as we take all the cushions and stuff off. This is our couch and our fire pit, you can see back there the picnic table that is all the way covered. This is our area, we’ve got Adirondack chairs that sit around a circle and the firepit. Then we’ve got gravel down here so it’s a nice space with the string lights overhead that creates that indoor-outdoor feel with you.
People come to Tahoe because they want to spend time outside, especially in destination markets around the mountains. It’s the area that brings them in, they don’t want to be confined to the room anyway and most people don’t even spend much time in the room. If you want to make the most use of your outdoor space and add amenities, check the boxes so that you’ll show up on more searches on the platform. And your listing will show up because you have those amenities, you can check that and get more guests and more bookings as a result.
This is a guest clause that we have on-site, which we’ve incorporated into all of our properties through trial and error to find out the best way to take care of our guests once they check in and once our staff is away from the property because we don’t have the 24/7 front desk like a normal hotel. In here, we’ve got the Smart Lock on that as well. We’ll give them the code and then they’ve got everything they need in here like emergency items, extra heaters, flashlights, extra towels, blankets, shampoo, soap, and things that they might need while they’re on the property. We can give them the code and they go take care of it.
Again, try to eliminate friction, try to be proactive and take care of the guests’ needs before they even arise. Our communication ratings and customer service helps us get that five-star review. And these are the Schlage Encode smart locks that I was talking about and we use these to allow automated check-in that is Wi-Fi enabled. They connect to the internet and our property management system so that when a guest books, they get that code sent to them through our automated messaging sequence. They get text messages several times before their arrival so that the check-in instructions are clear. This is to have a less friction check-in experience for them. That’s one of the big ones having automated check-in, the guests want to get into their place without having the host check in at the front desk, especially with this integrated boutique hotel Airbnb model. That’s a big part for us and our guests.
This is the room and don’t judge my bed-making skills because I did sleep here last night. You can see, it’s pretty simple and not a big space. Here we’ve got the Smart TV, stand, accent chair, and desk, which is nice for us. We also have extra storage space, the luggage rack, and vertical space where people come in with their bags. Everything is a functional setup because you can make a light breakfast or you can bring leftovers to heat. There are also a ton of restaurants all around us.
And this is our bathroom with a tiled shower that has a really good touch, and you got the toilet over here. So it’s pretty good sizable bathrooms and all the units. And then this is the room itself. So it’s simple, stylish, not a whole lot to it. But it performs well because, for the price people are paying, they get a lot of utility. And also really good customer service that we provide.
I’m glad to come here because it’s so cold outside. I mentioned that we bought this for $3.4 million. And that’s about 170,000 per unit. And that was on the higher end especially its more of a distressed property at the time because it was still going through renovation, there was a lot of stuff still do a couple of 100,000 to spend in capX and the furnishing to get it rent-ready for our guests. But we know the properties in the area are trading once they’re stabilized and fixed up for around 200,000 and below. So we had equity on the buy side, there just wasn’t as much to capture, because of all the money that we still had to put into it. But that was okay with us. Because it allowed us to reach an economy of scale in the market that would bring us to 34 units. And at the time, we just had a property manager and tried to have part-time maintenance and our 1099 cleaners. Making this shift here, allowed us to build out our team a little bit more robustly and allowed us to hire additional concierge members on the back end who do all of our guests’ messaging to make that team more efficient, and bounce out the schedules there. But then we could have a property manager and assistant property manager maintenance and all of our cleaners that manage both properties, and they’re only a couple blocks away. So it doesn’t take any time to get in between them. That was a big reason for us to buy this property to reach that economy of scale, and just run the whole operation in our market much more efficiently. Now when we look in additional markets, we look for that same thing. We know if we buy one hotel, we might produce good revenue and might have good net cash flow. But how hard on us will it be to manage that property now that at this stage? I don’t want to get back into the weeds of messaging all the guests and going through all the operational drag that just one property market brings. So I think as you build up and you scale up to get more properties, think about how you reach a level of scale if you’re going into a new market because you don’t want to necessarily buy yourself another job. You want to create passive income and build your portfolio and make it more sustainable as you grow. And this property allowed us to do that. Plus pretty nice.
