Featuring Stacee Nelson

 Interview by Linda Pliagas

 

Throughout the years, I have met many people at our live events throughout the country. After a while, you begin to know some on a personal level and begin to follow their progress as an investor. When I met Stacee Nelson years ago, she was busy rehabbing a single family residence in Santa Barbara. The project was a major rehab and the property was stripped down to the bare bones. Nelson is not one to shy away from complicated deals. She takes on projects with certainty and confidence. It’s been interesting to follow Nelson through her progression from rehabbing single-family homes to her risk-taking efforts in purchasing water-front properties and an REO tape, and now even a hotel. We recently caught up with Nelson to discuss her entry into the hospitality market with her recent hotel acquisition in Texas.

How long have you been investing in real estate, in general?

I purchased my first condo when I was 22 and then didn’t invest in anything for a long time. When I was living in Germany I started going to real estate auctions at the courthouse. My friend was buying properties to renovate and hold. I tagged along. In 2011, living in Santa Barbara, I began my formal education in real estate investing and purchased my first flip house in May of 2012.

I know you started flipping properties and I even saw one of your projects in Santa Barbara a couple of years ago. What attracted you to the hotel niche?

The idea of renovating an empty building into a small boutique hotel was initially the idea of my business partner. At the time we were looking for alternative passive income opportunities as well as ways to create a positive impact on communities. An opportunity presented itself in the form of an empty 15,000 square foot building directly on the town square in Gonzales, Texas. The town was keen to redevelop their downtown which made for a win-win opportunity.

Was it easier to take on the challenge and expense of a hotel rehab after doing many single-family home deals?

Initially we thought it would be a comparable project, just larger in scope. What we learned was that renovating an empty building into a hotel with individual plumbing, HVAC, cable, etc. was far more complicated and costly than anticipated. Certainly having a background in single-family home renovations was crucial in the planning and budgeting, but we were surprised by the sheer volume of issues that arose during the construction phase. The next one will go much more smoothly as a result of the number of…lessons we learned!

Tell us about the hotel. Where and how did you find it?

My business partner has a long-time family friend living and investing in the town. He made the initial introductions to the town’s economic development council who were very interested in supporting business growth in the area. Their support was a critical factor in the decision to purchase in Gonzales, Texas. We toured numerous vacant buildings in the area until we found one large enough and with a perfect location directly on the town square.

How long did the rehab take? Did the entire property have to be worked on or only a section?

The rehab took over a year to complete. There was a number of delays in the project when our initial contractor was removed from the project. Critical in the process, and one of our important lessons from this project, was to have a project manager on site during the construction phase. The volume of issues was simply magnified by 100 versus a single family renovation. Our hands-on project manager made the difference in our ultimate success and project completion.

To provide an idea of the complexity of a project like this: the smoke and fire alarm systems had to be coordinated with the installation of electricity and plumbing (water sprinklers), the HVAC system required coordination in timing with the electrician, drywall installer (ceiling vents) and the roofer (where the systems are housed), the water coming into the building had to be separated between the hotel and the restaurant located on the ground floor, and the elevator turned into a complicated project all by itself.

What was the biggest lesson you’ve learned from this transaction?

Rather than give one, I’m going to provide a few lessons we learned from this project:

  • For large projects, invest in a project manager who is on-site and regularly reporting on progress
  • Have the contractor regularly send pictures and review before progress payments are made
  • Necessity of a detailed project plan and budget agreed, in writing, by the contractor. We thought we had sufficient detail in our initial project summary based on our housing rehab experience. What we learned is you can’t be too detailed oriented in the budget and planning phase. The more detailed the budget and contractor commitments are, the better. Include a split between labor and materials so it is very clear for both sides, especially when you choose materials. Have the contractor sign the agreements
  • Budget sufficiently for contingencies. The larger and more complex the project is, the greater the likelihood for additional unplanned expenses
  • Have an agreed process for change orders that includes approving changes and costs before the work is completed

How is the hotel performing now? What are your goals with the property?

The hotel looks fantastic. The reviews of the guests who have stayed there are overwhelmingly positive. While we positioned the boutique hotel to provide executive style accommodations for the local oil industry, the majority of our guests thus far are visiting Gonzales, Texas for the regional rodeo events, the hot here the first shot of the Texas Revolution was fired.

In addition to hotels and single-family homes, your company also invests in Marina and resort properties around the world. That sounds very exciting!

Yes! We looked at a variety of different passive income and commercial real estate opportunities and decided that marina and resort properties were an ideal opportunity: It is a relatively untapped market segment with a few big players and the rest mostly individual marina owners which means opportunity to add value to struggling owners; it combines real estate with business; it provides regular passive income; and marinas and resorts tend to be a happy place for people, thus our motto: Invest in something fun!

Stacee, I’ve personally seen your growth as an investor the past five years that we’ve known each other, and let me just say how proud I am of you! I know you left the corporate world years ago to become a full-time real estate investor. You made it happen! Can you share some inside tips for others who want to leave their corporate job and be their own boss through real estate?

The process of becoming an entrepreneur has been wonderful as well as challenging, and even scary at times. There are a number of factors which have been critical in getting me this far:

  • Have a clear vision of what you want to do and achieve and then give it your all. Be tenacious in your pursuit, have faith in yourself and your vision, and do not give up! It will be difficult at times, and it will all be worth it in the end.

  • Have a source of income and / or savings to get you through at least a year of living before you leave your job. In my experience, everything takes longer than expected in real estate. Plan for that.

  • Surround yourself with the people you want to be like. For me that was successful entrepreneurs, business leaders and real estate investors from whom I could learn and to whom I could add value.

  • Partner with other investors who have a similar outlook on how you want to do business. I rarely do a deal alone. Sharing the project profits is well worth it to have partners with whom to share ideas, issues, opportunities and to raise capital.

  • Get educated before jumping in. I went to countless seminars and trainings to understand not only various real estate investing strategies but also marketing, asset protection, running a business and personal development.

  • Have a mindset of helping others achieve their goals, and understand that helping others first invariably leads to you getting what it is you desire.

  • Consider that 50% of something is better than 100% of nothing. I work with a lot of private investors. Sometimes the cost of capital is very high for a particular project. If it’s the difference between doing a deal and not, I take the higher cost of capital with graciousness and gratitude and get the deal done. The next one will be easier.

  • Work with honor, fairness and gratitude. BE the person people want to do business with.

  • And perhaps my biggest lesson so far is to simply ask each day ‘what do I desire to have or be or contribute today?’ or ‘What do I want to create today?’, and then be ready and open to receiving it. Once I understood the critical part in the process was asking without answering the question and being open to receiving what I asked for, my business expanded in incredible ways.

  • Have fun!

What’s next for Stacee Nelson and her numerous realty companies?

Going forward I’m focused on three areas in real estate: acquiring marina and resort properties, purchasing REOs in bulk nationwide to fix and flip, and contributing to the development and expansion of the Cashflow Divas, an organization dedicated to helping women achieve their financial freedom goals through passive (and active) income investing and financial literacy.

Stacee Nelson

Stacee Nelson is a Fund Manager for Purple Rooster Holdings, LLC, a private equity fund that purchases distressed residential properties and notes. As a real estate investor, she has purchased and turned around multiple single family residences, residential and commercial notes, and hotels. She owns investment properties in several states and has successfully raised millions of dollars in private capital over the last few years.

In her current activities in real estate, Stacee advises and collaborates with other entrepreneurs and investors in optimizing cash flow, deal structuring, raising capital, and having multiple streams of income to support financial independence.