RG 083 – Turbocharge your revenue management systems on your next deal with Tom & Tim Black
About Tim and Tom
- Tom is a medical doctor and is an active healthcare blogger.
- Tim has worked in the hotel space across operations, sales, marketing and management.
- They work together to invest in property across hotels and multifamily.
Nuts and Bolts
Tom left school at 18 and joined the Navy and once he left he decided to go to college and got into medicine. A decade later he found himself in a job that relies on human capital and he had no assets so he decided to get into real estate. He bought some foreclosure homes as rentals in 2008 and learnt about tax appreciation. Tim worked at 6 Flags as park president until 2000 when he moved to Great Wolf Resorts as COO, when he retired he took 6 months off before partnering with Tom in real estate.
Tim and Tom invest in hotels and multifamily assets focusing on the Texas markets due to their decompressed CAP rates and high levels of inventory. Last month they also closed on a commercial asset which was a triple net leased industrial building and they now have five of these in their portfolio. Tim and Tom have recently started looking into limited and select service hotels because they are similar to multifamily properties, the only difference is the operations and Tim has a lot of experience with hotel ops. They chose commercial real estate because of the economies of scale as it’s the same work with less tax risk and more of a partnership mentality with the bank, so personal loss is less likely. They have recently moved into the Atlanta market and mainly stay in the Southern and South-Eastern states because they are more landlord friendly. Rather than spreading themselves across many markets Tim and Tom have decided to find approximately 2 markets and really get to know them.
When starting a deal and projecting for risk, Tim and Tom start with a five year projection and underwrite at this but calculate the terms of a loan at 10-12 years. After collecting rents they calculate operating expenses in order to work out the revenue management, however it’s slightly more complicated then this explanation. Tim and Tom focus on external factors that could impact the operating costs and rent levels, for example the weather. Weather can have a huge impact on how many people view a property and the time of year people want to move. Tim and Tom learn all about their customers through extensive market research and price their rooms based on the data. For example an apartment may have one cost at 3pm on a Tuesday however the price will be different for a viewing at noon on a Saturday. This change in rent levels can shock some people into signing for the deal immediately in fear that the price may change again.
Tim and Tom do the cost segregation on all their properties, this is done right away if the property is going to be a long-hold because of the large 1st year depreciation. They get a third party engineer to come in and are able to redistribute the pro-rata depreciation. Tom is also involved in real estate education for physicians and has written a book helping them to invest their savings. Looking towards the future Tim and Tom and looking to go into commercial real estate even more and invest in a service limited hotel, they’re also trying to build a personal brand and grow a strong foundation.
Top tips
- Most important habit – Doing emails on his phone and long walks without phone to clear the mind.
- Most influential person – Tom says Rom and Bob Helms and Tim says Gary Storey
- Most important tool – Computer and Abel (their finance guy)
- Most important advice – Don’t procrastinate
Contact – napalicap.com
blog – freedomintheblack.com
tim@napalicap.com
thomas@napalicap.com
