What is happening, YouTube? I've got a super, super exciting real life story at a project
that I'm super grateful and super blessed to be involved in. It's also just a really
great lesson on how we can take properties and create real value add. But there's rules
to value add, and I've got a good friend of mine and business partner I'm super, super
honored to call my friend, Josh McCallen.
Wooh!
Yeah.
Hello guys.
Say hi, Josh.
Welcome to Renault.
Yeah. This is the Renault Winery. Josh, tell us a little bit about what we've got here.
Then we're going to talk about how you created a phenomenal value add program here that ... I
want to tell you guys, the principles Josh is going to outline here for us can be applied
to any project.
Any project.
Any value add. It doesn't have to be a rehab of 150-year old winery. It could be any deal
you guys are doing. If you guys apply Josh's principles, you will be successful in value
add. So first, Josh, where are we? Tell us about what we got here.
Well, thanks.
What's behind me here?
It's good working with a pro that's got ... You might as well be a TV producer. So we are
at ... Just between us ... Many of you know us because Matt and I have been doing events
here for years now. Renault is this really historic property from 1864. You and I love
it because it has this branding of winery. But what Matt and I talked about from the
day we found the project was, wait a second, this is a massive revenue generator if we
do all right.
So wine is cool. Golf is interesting. But how about we just make tremendous amounts
of revenue and then give that back to the investors. So there's a lot more here than
just the word wine is what I'm trying to say.
Yeah. It's not just a winery, it's a resort.
It is.
There's a full experience here. Josh and his team purchased this property, and we're so
grateful to be involved in it and helping raise capital for this. Josh at Accountable
Equity has a lot of other good stuff going on. If you guys want to hear about a lot of
great alternative asset resort renovation projects, we will put a link to Josh's company
in the show notes below so you guys can reach out to Josh and hear about investments in
this project and other stuffs for accredited-only investors.
Tell us, in the renovation, the purchase and renovation of this property, what are the
three keys to value add that could be applied to any types of real estate? I mean, again,
this is applied to the renovation of a winery, hotel, golf course, resort space, but what
are the principles?
Yeah. Sometimes we just keep it simple for our own mind. We say, "What does Warren Buffett
do when he looks at asset acquisition?"
I want to know that.
He looks at value, he looks at distress situations, things that have intrinsic, like I said, value,
but are maybe not in favor. So right now happens to be one of the best times in history for
our business model, which is doing what Matt does in multifamily and we do in resorts.
It's going to be the best buying season, perhaps in our lifetime, for hospitality over the
next 18 months.
So, number one, find a way-
Find a low price, high value.
Find a way to get value. Let's call it like find a way to get value at a good price, right?
Yeah.
So what was purchased here was 150-year old resort with a tremendous history to it, lots
of acreage, a moneymaking golf course, a hotel, everything like that. But if you guys are
applying this to your business, buy something where you're buying a 150-unit building or
a single-family home that's in a great location, whatever, that is at value. You've got to
get some sort of a discount applied-
At purchase.
... at the beginning, at purchase. Now Josh got a phenomenal discount in the purchase
of this place. Number one, because not that many people know how to run a resort, this
guy does, and that's what makes him a phenomenal investor because he's in such a unique space
of real estate. As they say, there's riches in the niches.
That's where we're at.
There's riches in the niches.
Then, of course, sadly, this distressed economy is ideal for acquisition. It's a funny thing
we always forget. Warren says be greedy when others are fearful and be fearful when they're
not greedy.
Yeah, and be fearful when others are greedy.
We all know, two years ago, nobody was fearful.
We've had a lot of that coming up.
We're in the right buying time.
So, number one, get value when you buy. What's step number two?
So for us is Matt and I also love value add, which means things that are either in this
industry, we call it functional obsolescence. So this property had 120,000 square feet of
space and only about 13,000 square feet of it was being used to make money.
Wow!
That's just because over the years, they migrated from one space to the next, meaning this was
a large manufacturing plant 80 years ago, meaning this was a major wine producer. Over
the years, obviously wine production became less profitable, so they moved to catering
and food and beverage. But they never updated their spaces. So it wasn't calibrated right.
Today, of the 120,000 square feet, only 10,000 is designated to wine. The rest, over a hundred
thousand square feet, is designated all moneymaking.
To revenue-generating activities.
So value add is great, we all love a pretty countertop, but it has to be correlated to
proof that it'll change your revenue.
Yeah. So that's like buying an apartment complex. It's a hundred thousand square foot apartment
complex. But 90% of it is common area.
Oh, yeah. Too much common area.
Yeah. It's just too much common area. Too much space is not generating revenue. If you
guys are looking at any deal, you've got to find a way to say, "Okay. Well, if I replaced
those countertops, is it going to put dollars in my pocket?"
You have to look through that.
Every time you make an investment in a property, is it going to generate revenue? What's behind
me at Renault, right about where my finger is a full wedding hall that generates revenue
for this site.
Mega amounts of revenue.
Yeah. It was nothing before. It didn't generate revenue.
Yeah. This actually was called a wedding home, but it had two windows and could seat 250
people. It was oppressive. So it was functionally obsolete. It had the right idea and was not
sellable. So we made that change.
So, number two, find the spots to add value. What is the third value add principle we want
to bring here?
Yeah. This is one that I hope most of you take an aha, and that is add a revenue stream.
You and I can brainstorm for multifamily, because there are two that I can think of
for multifamily. In our business, which is real estate basis, I mean that's why we buy
because it's real estate, but then we overlay our operational skills and we just look for
ways to add revenue streams.
For every new revenue stream that throws off profit, we exponentially change the value
for the investors, meaning, yes, it's nice to make 500 extra thousand dollars because
we added a festival component, but what did that $500,000 do on a multiple when we go
to get a debt refinance to pay you investors back? It what? It did eight times. It did
eight times what-
Yeah, because you applied the cap rates.
You applied the-
Forced appreciation.
It's called forced appreciation. You can do it without time, meaning it doesn't take six
years for that to happen. In my business, we can generate it in one year cycle of selling,
whatever it is we're selling.
Yeah. So add a revenue stream. Now this could apply to real estate guys. You could put a
washer/dryer in the basement of your multifamily. You could find other value, add services that
you want to offer tenants, like storage on site or something like that.
Absolutely.
Of course, for a site like this, there's many, many other value add services that can be
added for a resort space. There's a lot of different ways that people want to spend money
or are excited to spend money at a place like this.
You nailed it. It is like that. What if your lobby in a multifamily was too big and there
was a disproportionate ratio. Perhaps you glom on some of the lobby to some luxurious
condo units and perhaps charge more. So there's all kinds of ways you can change the revenue
mix.
Sorry to cut you off. A real thing in the lobby here, Josh put in a little store. We're
developing a little spot for retail so folks can go and buy some of their essentials that
they may need for themselves or whatever. That's just a little value add service. It
might make a certain amount of-
$20,000, $30,000 profit a year from nothing. But the real estate was there.
Yeah, apply the cap rate. The real estate was there. That's a small value add, and you
just drop in revenue streams in your properties wherever you can that maybe is not just rent
or your core revenue stream, but drop in multiple streams of income. That's another way that
you can guys do real value-added property.
So great lessons, guys. I hope you guys take this to heart. Again, if you guys want to
get in touch with Josh, hear more about this property or myself, you could either get ahold
of us at derosagroup.com and hear about our involvement in this project and some of the
other hospitality projects we're involved. But you could also reach direct out to Josh
on his podcast called Capital Hacking.
That's true, Capital Hacking.
The Capital Hacking Show.
Enjoy. We teach the same principles there.
Yeah, Capital Hacking. I've been a guest on it and he's had other phenomenal guests. He
teaches a lot of the principles that we talked about today. We'll put a link to Josh's website,
accountableequity.com, in the show notes.
By the way, you're welcome to come here. I think in a few weeks we actually ... Some
VIPs, usually like Matt, we come, we gather, we brainstorm and mastermind for investors
and potential investors.
We run a lot of events here.
You're always welcome.
COVID or no COVID, there's a lot of ways that you can do business here. They abide by COVID
rules. You don't have to wait for COVID to be over to get out and start participating
in [crosstalk 00:08:22] like this.
Would you mind panning this? I know it's going to be hard for the families to see, but this
is about five acres of outdoor restaurant. So when COVID said, "Go ahead and [crosstalk
00:08:26]-
Look at that.
... six-foot distance and do it outdoors"-
270 acres. No problem.
Right. So it's a little bit of an unfair advantage. Most places have a, what? A 20-foot balcony
or patio. We have a five-acre outdoor garden. So we set it up with hundreds of tables at
eight-foot distance, not just the six-foot requirements. So it's been amazing, the response.
Yeah. That's a really amazing site. Josh, thank you for joining us on YouTube.
Thank you, bud.
Thank you guys for watching and have a great and profitable week.