Matt Aitchison is a real estate investor, syndicator, speaker, and private equity consultant. After graduating from UC Santa Barbara, Matt got his start in the world of single-family and built a Wall St Journal Top 1000 Real Estate Team. Matt quickly transitioned to the investment arena, personally flipping hundreds of houses while simultaneously consulting with hedge funds like Invitation Homes and Waypoint. He now owns Vault Investment Properties, a private company that acquires and operates his own passive income portfolio comprised of commercial strip centers, hotels, single-family rentals, and multi-family assets. Additionally, Matt and his team now consult with various investment and private equity groups to identify sound investment opportunities for equity and debt placement, development, and asset acquisition.
He is extremely passionate about helping others create more wealth, freedom, and fulfillment in their life through real estate investment opportunities and is also the host of the Millionaire Mindcast, a Top 100 ranked business podcast in the world. Most importantly, he’s a husband to his amazing wife Marie and two beautiful daughters, Ella and Evelyn.
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Texas Hotel Opportunity Zone Investing with Matt Aitchison
Brett:
I’m excited about our next guest. He’s a repeat guest. He’s a good friend of mine. I see about two or three times a week at the lifetime gym in Roseville, if you’re familiar with that. We used to play basketball a lot. But now he’s kind of, we’re kind of not finding gyms anymore. We’re working on getting that going. He’s been featured on The Wall Street Journal, Forbes, bigger pockets, Buzzfeed entrepreneur, The Huffington Post, he has all things like wealth, real estate leadership all wrapped into one. Please welcome to show with me, Matt Aitchison. Matt, how are you doing?
Matt:
I’m great brother, how are you doing?
Brett:
Better than I deserve. I’m excited to have you back on the show. For our listeners. We’re getting to know you for the first time, and just a second. You’re gonna tell us a little about your story. But just so everyone knows. You’re talking all things Texas hotel opportunity’s own investing, and so take it away. Matt, tell us a little about your story and your focus.
Matt:
Like everyone, you start from the bottom. I have been on this, I guess, real estate investment journey for the last 12 years now. I graduated with an expensive piece of paper and had no idea what I wanted to do with it, and as I was interviewing with a bunch of different, jobs and positions to make 30, 40 grand a year. I was like, this is just not going to get me where I want to go the lifestyle that I envisioned for myself, and so kind of a crazy story. I ended up finding one of those Craigslist Ads, real estate investor seeks mentee. This was back in 2010, and that first year, basically, I ended up working for a guy for free for a year, flipped over 100 houses with them. Then I realized, I know how to do this for myself. But I was still broke living at home didn’t have any money, and really just not a ton of confidence in how I was going to go about doing this. But long story short, I ended up finding my first flip back in 2010. I netted over $100,000 on it. I was like, I think I can figure this out, and that led to flipping, a couple of 100 houses over the last decade.
But I realized that my vertical income wasn’t going to unlock the freedom and the time that I was, looking for in my lifestyle, and so I started, buying real estate and holding single families and then moving up to quad plexes then starting to buy commercial strip centers, and then a couple of years back, I got a little bit more into the private equity family office, fun space, and that was something that really kind of opened up a lot of different doors for me where my skill set still translated, it was just kind of playing a different board game in terms of the single family investment world that I’ve been in for a significant portion of my career and going okay, once I passed go a couple of times, I was like I can learn this strategy, I can figure out how to apply my skillset in this arena in these areas, and so I started doing syndications and started, working and consulting with different private equity funds and placing capital for them and family offices, recapping deals, development opportunities. That led me into hospitality.
Now I own three hotels myself, we’re building a fourth, which I’m sure we’re going to be talking about here today on the show. That’s an opportunity zone on the riverwalk in downtown San Antonio, and so hospitality kind of is where I’ve planted my flag now, but still doing some syndications, placing equity in different deals, and just having fun, understanding that there are so many differences in the forest of real estate, there are so many different tree trunks that you can go and chop it, and so many different branches off of those tree trunks that are opportunistic for investors, whether you’re an LP or GP and so just a really fun, world to get to call a career in terms of the real estate space.
Brett:
Phenomenal. Matt, I always love seeing you spending time with you playing basketball with you, and seeing the deals. This Podcast Youtube world we’re kind of and not a lot of people are local. We’re all kind of all over the world, and so to have someone local, like yourself, is really, really a treat. I appreciate that, and by the way, you can learn more about Matt by going to his website. I wanna make sure I pronounce your last name because I feel like it’s just kind of a tongue twister with Matt pronounce the last name.
Matt:
MattAitchihson.com. You guys can check out more stuff there or MillionaireMindCast.com on my podcast but both of them kind of feed into the same spot.
Brett:
Let’s dive right into the topic at hand which is Texas hotel opportunity’s own investing this deal in San Antonio. I’ve been watching it for a while now even send us some referrals for some folks who, perhaps, wouldn’t be the best fit for the Deferred Sales Trust but are looking at opportunity’s own investing a way to Defer Capital Gains Tax. Matt, let’s talk about a just for folks who are learning with the Opportunity Zone, quickly, like what are the advantages? And then B, let’s dive right into the deal and the specs of the deal?
Matt:
The Opportunity Zone is kind of a sister to 1031 Exchange, and honestly, the Deferred Sales Trust in, just a little bit different have a capacity where it’s a tax deferral vehicle, where you can put in gains and not just, in 1031. Obviously, it’s real estate gains, that we’re deferring. But the beauty of an opportunity zone, when they created this back in 2010, was to ultimately provide anybody with gains to invest into what they believed was at the time when they did the census and kind of labeled all the opportunity zones around the country as underdeveloped or underserved areas or communities and mind you, we got pretty lucky with this one. For example, there, East Austin, parts of East Austin, Texas, which is one of the hottest development and areas in the entire country is an opportunity zone.
The same thing with this particular area in downtown San Antonio on the Riverwalk, and there are a couple of others maybe 10 to 15% of opportunity zones, in my opinion, have just turned into insane hotspots that if you were able to buy dirt or opportunity in those areas in an opportunity zone, not only did you get the upside of what’s now happening in those areas, but the fact that opportunity’s own in this vehicle, this tax deferral vehicle, that it allows you to put gains in and defer those taxes, and in unison with that get the upside and the growth of its tax-free as well. Very cool. Whether it’s, crypto gains with stock gains selling a business, obviously real estate and you couldn’t find maybe a 1031 Exchange to go into opportunity zones are a great vehicle to explore for investment opportunities.
Brett:
Texas is, maybe the now the new business capital of the world at least seems like all the businesses flocking there, Tesla, Oracle, one other one all flocked to Austin and I think San Antonio, I was looking at the deal underwriting the hotel deal. It’s like one of the most visited places in all of America for tourism. It’s really surprising. Touch bases on just the tourist attraction for San Antonio, and which is why hotels are perfect for tourists. Then dive into the specs of the deal and what it’s looking like.
Matt:
To be honest, everybody says that, and I was even shocked in the beginning as well. My business partner is very well integrated into the San Antonio community. But when he enlightened me on these market demographics, when we were doing a lot of studies a few years back, to see how many people frequent San Antonio one, it had been a very Hispanic cultural influence kind of being one of the gateways to Mexico and a lot of, Mexican influence within the city. The amount of tourism that happens every year, not just with Hispanic influence, but from travelers all around the country to come and see the Riverwalk and enjoy some of the things in San Antonio with Alamo and other great things, and then obviously, there have been a lot of business travelers. It’s one of the tops frequented tourist destinations in the entire country, which is absolutely insane to think about. Also, it’s kind of the last frontier in Texas of a large, let’s just say, a large, city that really has not been overinflated or overdeveloped yet. You got Houston, Dallas, Austin. Some other areas around Texas that, have just been frothy for a really long time, and so now we’re starting to see a lot of those individuals, those companies, those funds, those groups that are going okay, maybe we should start looking at another market and diversify now to some of these markets.
San Antonio is really that last market. We’re really excited to see what infrastructure, what plans and what companies are moving a lot of capital into this area. From that perspective, very excited, and in particular, we’re a boutique model. We’re a luxury boutique model that is not your traditional flag hotel and the number of keys in the San Antonio market for boutiques is very underserved, and at the same time, we also believe that the market trends and data and kind of studies in terms of tourism and traveling where people are saying they want to stay at not at kind of your sterile beiges and browns and whites, in the Hilton or the height anymore, they want to get something that immerses them into the community and the place that they’re traveling to, and the food that’s, customary in those areas instead of kind of your cookie-cutter type stuff. That’s one of the things that we’re really playing to, and then our operating group, for this particular hotel, which is a core, they acquired SPE, they’re one of the largest hotel operators, behind, let’s say, Hyatt and Hilton in the world, very big footprint in Europe and other countries around the world, and they’ve got a good footprint over the last couple years in the United States, particularly in the luxury market, San Francisco, New York, Atlanta, Chicago, and we’re going to be their first luxury boutique hotel in Texas. We’re really excited that we know what we’re great at, we’re good developers.
But when it comes to, making sure that we’re over-delivering, and under-promising for our LPs and our investors that are coming into our world, we really wanted to make sure that we had assembled the best world-class all-star team who’s great at what they do, we know what we’re good at, we know what we’re not good at. Getting the right people in the right seats on this development team, was something that we were very particular about when it came to the contractor, the interior design team, all the architects all on the engine and you name it, we really took our time on this one, and COVID actually, been what felt like a catastrophic blow two, this deal was actually a major blessing, one being that we own the dirt, we were able to fully entitle it and kind of take some time to court, the right people to really kind of select what we, would consider our starting five, to go out there and win the championship. In terms of the deal, I’m sure we’ll dig into that in a little bit. But we’re just really excited about the market and the team and where we think hospitality is going, and there has been some major opportunity in some areas that institutional players haven’t branched out to yet.
Texas Hotel Opportunity Zone Investing: “Understanding that there are so many differences in the forest of real estate, there are so many different tree trunks that you can go and chop it and so many different branches off of those tree trunks that are opportunistic for investors.” – Matt Aitchison
Brett:
Phenomenal. I love it. It’s hard to find deals, I’d also second that’s hard to find deals and opportunities zones, a lot of these deals, it seems like they were already, kind of run-up in pricing, and even opportunity zones. By nature, they’re more challenging because you have to essentially do whatever you bought it for, you need like double that in order to get the full extent of the opportunity zone. It typically means it’s either a complete gut redo of a property or ground-up development. It’s hard to find all of the types of a Rubik’s Cube and you got to get the colors lined up for the location and the returns and then the team and then and then the tourism in the state. I feel like you guys really have found this diamond in that rough. You have the team and I can also speak to your business partner, Jake, who’s a good friend of mine, and he and his brothers have helped, do construction and rehab on my personal houses. It goes back very long connections here. I can’t speak highly enough about Matt and Jake, who are part of that dream team. That being said, let’s dive right into some of the particulars. Like, let’s say somebody’s A to the newbie accredited investor one way or the other, B let’s just use if they put $100,000 in analysis, imagine they had a zero gain. Let’s say they bought cryptocurrency for $1, and it’s worth 100 grand, and they just sold it a couple of days ago, and they’re like, what am I gonna do with all this tax? Matt, can you kind of walk us through that scenario?
Matt:
Obviously, we always preface our disclaimers, obviously, talk with your CPA or your accountant, your tax advisor. With that being said, let’s say you’ve got a so we wanted to engineer this deal, in a way, we’re big on under-promising over-delivering, and one of the things that I think is is plaguing the syndicator, and the developer world is over-promising your LPs on a pro forma, what their, their equity multiple is going to be, what their IRR is going to be what their cash on cash is going to be, and we wanted to make sure that if we’re going to take this out, and raise this capital that the deal itself stood on its own, whether you were putting in capital gain money, or not just traditional equity, does this, kind of hit the return threshold that most, savvy investors and LPs would look for. Our minimum investment is $100,000.I’ll just use that as kind of our rule of thumb here in this conversation. But in that respect, if you were to just put, traditional equity into this deal, it’s going to be about a 22 to 23% IRR. Now the unique aspect of an opportunity zone is you’re in it for 10 years. That is one aspect that is a little bit of a different caveat that some investors are used to getting, in and out within five or a seven-year timeframe. However, we engineered the return of capital schedule to be a little bit more favorable.
I’m weighted on the front end because of what I’ll share here. In a second, so if it was traditional equity going into B about a 22% IRR, you throw in your capital gain, equity into the deal, that’s going to significantly juice your IRR, you’re not going to be paying that money to Uncle Sam. You’re going to be able to go and get a return on that money instead of a seen it, slipped through your hands. That would put it in the range of A 30% IRR. What I always like to say is, the way we engineered this deal, we buffer in a lot of safety nets, and a lot of contingency plans. Because if we don’t have to worry about those things happening, all that’s gonna do is just over-deliver on what we promised our investors in the IRR. But we wanted to bake all those things into being extra careful. We’re talking about, all of the issues that we have going on with, materials and labor, we significantly increase those prices, I mean, drastically, where it’s beyond worst-case scenario, and we’re still feeling good about where those are at our construction timelines because we’re doing development.
This is going to be something that we have to deliver a product, get the product operating, and then part of our return schedule is making sure that in year three, once we’re vertical, and we go for a refi, we’re returning 100, and I think 3% based on our pro forma of initial equity contributed, so you’ll get let’s say that 103, that 100,000 That goes in, you’re going to get about $103,000 back derisk it and then our eight pref kicks in until you’re 10. That is something that we wanted to make sure that we were kind of allowing our investors to take some chips off the table, whereas maybe in some other syndication opportunities, you’re maybe going to see a 12 month seasoning period, and then distributions might start. That was something we knew we had to kind of play around with to make it a little bit more appetizing because there are patients and there’s also risks being fully transparent when you’re dealing with development, interest rates, or debt financing, some of these things that are somewhat out of our control, but making sure that we’re baking in very conservative and careful numbers into our prom pro forma to make sure that, hey, we think we’re going to be well below these things, and let’s make sure that the deal still stands on its own with these things being in there.
When you said diamond in the rough, it really does feel like that to us, we feel very fortunate that we are hitting kind of a stride and also going to be delivering product at a time when we think the market is going to be well underserved and craving a very unique boutique hospitality product. That’s something that, we are all taking into account as we model out this construction schedule, and we’re just about there to be breaking ground on, this opportunity by next February. The shovel and groundwork, going in are going to be something that we think q1 will be right there to see this project moving forward.
Brett:
It’s amazing, and also I think it’s helpful to understand that you’ve done fixing flips for hundreds of homes. You’ve worked with a mentor who did that as well, and as well, your business partner Jake hair, the same thing. This is extensive, hands-on, it’s not their first rodeo when it comes to construction projects, and underwriting and contingencies and labor, and all of that’s involved, it’s completely separate than just hey, I’m going to go buy an apartment complex, and so having that dream team in place gives me the confidence to bring you on the show, and share this with all of the Capital Gains Tax Solutions, nations. Also also, by the way, streaming oneXpertCRESecrets.com. If you’re watching this as well, we always want to bring on the best. We are running out of time, Matt, so I know you have an amazing thought. But I want you to remind the listeners where they can find you where they can connect with you. We could always jam again in another couple of weeks, but I’m up against the hour here. Matt, where can people find you?
Matt:
Anytime people can reach out, Matt@vIPHousingSolutions.com. Or an easier way is just to if you want to talk about the deal, it’s called the ARTISTA just text the word ARTISTA, A R T I S T A. Text the word ARTISTA 844-447-1555, and that’ll at least allow me and my team to know that you want to talk or maybe engage on the RT stuff you want us to send over the deck and the Proform or you want to jump on a call, we’d be happy to do that any investors this is for accredited investors only. If you are somebody that wants to jump on this call, and at the end of the day, we love to meet new LPS this isn’t the only opportunity development-wise and or syndication-wise that we’ve got out there. We do a couple of different opportunities every single year. Just understanding other investors’ goals, what is their investment criteria? What are your return criteria? What are you looking for, because whether it’s something that we might have in our pipeline or portfolio, or it’s something that we can connect with other great vetted syndicators? I’m always a big one, and connecting those dots adds value, or we can so just text the word ARTISTA at 844-447-1555. We’d love to connect with anybody that wants to chat.
Brett:
Thanks, Matt Aitchison. I also want to thank our listeners for listening to this episode of the Capital Gains Tax Solutions Podcast. Again, where we always believe it’s more important to have a plan in place before you sell a highly appreciated cryptocurrency business won’t want to go on a 1031 Exchange and sell anything else. That’s how they appreciate it, and so using a Deferred Sales Trust or an Opportunity Zone with Matt is a great way to defer your tax grow your wealth, and keep that money working for you. You can go to CapitalGainsTaxSolutions.com To learn more about the Deferred Sales Trust, and again, to connect with Matt on the Opportunity Zone in Texas. Thank you so much for watching or listening to this episode. We so appreciate everyone out there. You can rate review, subscribe, that’d be wonderful, and we hope to talk to you real soon.
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About Matt Aitchison
Matt Aitchison is a real estate investor, syndicator, speaker, and private equity consultant. After graduating from UC Santa Barbara, Matt got his start in the world of single-family and built a Wall St Journal Top 1000 Real Estate Team. Matt quickly transitioned to the investment arena, personally flipping hundreds of houses while simultaneously consulting with hedge funds like Invitation Homes and Waypoint. He now owns Vault Investment Properties, a private company that acquires and operates his own passive income portfolio comprised of commercial strip centers, hotels, single-family rentals, and multi-family assets. Additionally, Matt and his team now consult with various investment and private equity groups to identify sound investment opportunities for equity and debt placement, development, and asset acquisition.
He is extremely passionate about helping others create more wealth, freedom, and fulfillment in their life through real estate investment opportunities and is also the host of the Millionaire Mindcast, a Top 100 ranked business podcast in the world. Most importantly, he’s a husband to his amazing wife Marie and two beautiful daughters, Ella and Evelyn.
