Today on Unstoppable REI Wealth I am joined by a guy that is changing the game with short-term rentals. Sief Khafagi is an ex techie turned real estate investor who has helped thousands diversify into real estate after spending nearly 5 years at Facebook where he built the 2nd largest engineering organization across the world. 1000+ hires later, it hit him: a company’s most important asset is its people. Today, he’s the founder of Techvestor, which helps real estate investors and busy professionals passively invest in the emerging asset class of short term rentals (aka Airbnbs) and build for their lifestyle. All investors get to use the properties they invest in, further creating utility AND returns. Techvestor’s advisors include folks from AirDNA, Realtor.com and Bigger Pockets. But this isn’t your average real estate investment company. Techvestor built it’s own proprietary sourcing technology where they can underwrite over 50,000 properties a month and acquire the best ones for their investors. It’s as if a real estate company and a tech company had a baby. https://techvestor.com/ or you can email to sief@techvestor.com And after that head on over to... https://easysell411.com https://billyalvaro.com https://billyssecrets.com Who knows maybe you will be our next partner? To get some neat (and FREE) Tools | Tips | Tricks to help you in REI!
Today on Unstoppable REI Wealth I am joined by a guy that is changing the game with short-term rentals.
Sief Khafagi is an ex techie turned real estate investor who has helped thousands diversify into real estate after spending nearly 5 years at Facebook where he built the 2nd largest engineering organization across the world. 1000+ hires later, it hit him: a company’s most important asset is its people.
Today, he’s the founder of Techvestor, which helps real estate investors and busy professionals passively invest in the emerging asset class of short term rentals (aka Airbnbs) and build for their lifestyle. All investors get to use the properties they invest in, further creating utility AND returns. Techvestor’s advisors include folks from AirDNA, Realtor.com and Bigger Pockets.
But this isn’t your average real estate investment company. Techvestor built it’s own proprietary sourcing technology where they can underwrite over 50,000 properties a month and acquire the best ones for their investors. It’s as if a real estate company and a tech company had a baby.
or you can email to sief@techvestor.com
And after that head on over to...
Who knows maybe you will be our next partner?
To get some neat (and FREE) Tools | Tips | Tricks to help you in REI!
SUMMARY KEYWORDS
short term rentals, people, multifamily, fund, invest, building, properties, software, asset class, data, space, airbnb, equity, asset, investors, drive, markets, buy, market, investment
SPEAKERS
Billy, Sief
Sief 00:01
Boom Welcome to unstoppable real estate investing well my name is Billy Alvaro, aka the unstoppable BA former billion dollar mortgage banker gone bankrupt turn professional real estate investor, where each week you'll learn the tools, strategies, systems and secrets myself and other highly successful real estate investing entrepreneurs use to start, grow and scale their businesses creating massive profits and how you can too, and we'll teach you how to put those profits to work. So you no longer have to get ready to finally experience financial freedom and generational wealth now let's get started. What is going on everybody? Welcome back. Now the episode unstoppable Rei wealth unstoppable for a reason because we just keep on pushing forward making shit happen, teaching you guys the secrets of how we create wealth, cash flow, flip properties, wholesale, all that good stuff. So watch this. Listen to this for a while you know that I'm all about teaching people how to start grow and scale. And I love nothing more than to get different trances for those groups I had on a bunch of people in the scaling sign of growth side. You know, this young cat today 29 years old only been doing this for like a year from what he told me. His name is I don't want to butcher it. Sief Khafagi, did I get it right? Yeah, Sief Khafagi. Thanks so much Billy, thanks for having me. Welcome to the show, brother. So let's do your 29 years old, you've only been doing this for a short time, like a short time from what you told me. Let's go back. And What did you do prior to get into real estate investing. I was a recruiter and manage teams early at Facebook. So I spent five years at Facebook building teams all across the world. And, you know, I think of it as building a company because we our team was at nine when I started and we took it to 1100. So to me that felt like company growth, not just team growth. And we certainly treated it that way. And I think that's why a big philosophy of ours today. With what we do over at Tech fester is all about people, right? That's why we're in the short term rental space hospitality but also making the investment experience as passive easy and simple as possible. And you know, from what I'm told, our investor experience is one of the one of the best that our our LP's Get, get the experience. I love this. So you keep referring to we you have partners in the business. I do. So Sabrina is my partner and co founder and she herself has a really impressive backstory, she built airpods and took that to a billion dollar product. So we both come from tech in the short story there is we were traveling all ourselves and staying in all these shitty Airbnb ZZ back in a day. And we're like, Damn, we really think we could do this better. And so we went and tried to acquire a couple. And that process was just old and archaic. And keep in mind, we're coming from like, these very privileged tech campuses, where you know, everything and how you do things is like, you know, tech enabled, right? Like how you move around, and just the things we see. And then you enter the world of real estate and short term rentals. And it's like, you know, kind of the feeling of like, when you see a fax machine these days, you're like, people still use that right. And so our first foray into this was actually building software naturally to techies. What else did we do, we built software, we built software that would allow us to help you identify and discover the best possible places to invest based on data, right? Because everything is data driven that we do here. Every single day, we showed the software to everyone we could everyone loved it. Problem is no one wanted to use it. They're like, this is great, but you know what, you do all the work for me. And I'll happily give you some capital. Right? Like, I don't want to do this. And that's kind of when we kind of learned a little bit more about the world of funds and syndications. And, you know, we would raise our first tranche, then today, we've, you know, raised a good amount of money to continue scaling this thesis. And we're really trying to institutionalize the space of short term rentals, we really think it's the highest cash flowing asset that you can buy in the real estate space. And honestly, one of the most fun one that gives a gives back to the community by providing experiences to us in a post pandemic world. I hope we were all cooped up for far too long. So there's three things I want to I want to discuss with you. You mentioned the technology I want to get into that. You mentioned how you doing the short term rentals a little bit differently. I want to get into that. And then the third piece is most important I want to speak about your investors and how you're bringing them in and what makes you different than everybody else. Let's start on the tech side your software you said it just it figures out where to best invest based on data. Is that the some of it or is there other stuff that it does as well? Yeah, So really, it's, you know, two or two or three points really that we kind of want to accomplish with our software. The first one is we do what's called Market mapping. So right now we're tracking about 257. local markets, where we track the supply and demand of properties in that market we track other data points are, what kind of home is best to buy with the highest ROI. So for example, in Scottsdale, Arizona, depending on the zip code you're in, and really which neighborhood the difference between a four and a five bedroom is massive, right, understanding what to buy what your buy box looks like. In each local market, we believe every market is investable. And each market has the best type of return, depending on the type of asset you buy. This would be short term rentals, exactly specifically for short term rentals. Early on, we were lucky enough to bring on scatch Scott Shepard, who is the founder of air DNA as one of our advisors. Rob All the Solo is the host of the BiggerPockets Podcast also sits with us. So we have what we call key people in key places. You know, Laszlo, I was previously the SVP of analytics@realtor.com. So we plug into the MLS nationwide, nationwide. So these are kind of the advantages we have there. Secondly, after we market map is all about speed and discovery, right? I mean, we can all remember this, we can all agree that the market today is a little softer than it was about a year ago. But last year, I mean properties were going off the shelf and about five seconds or less. Right? So we know you got to you got to know what's coming on market as quickly as possible. So our software every 15 seconds, we scrubs the entire country and tells us what just hit the market. Right. And if it qualifies what we're looking for, we get alerted, right. So speed mattered at the time and still matters today to an extent. And lastly, from an operating perspective, we understand what the best comps are, we understand that we never go and enter a market or buy a property thinking we're going to do better than what the data today suggests. Right? So we're buying within that Buy Box. However, based on our operational excellence, so far, we've been able to drive 42% more revenue and 52% more occupancy than the average property in our markets. Right. But this is what the software allows us to understand is what to buy. And we both know, you make money on the buy and reduce your risk significantly on the buy. When you understand the data, no doubt incredible. And you and your partner, you brainiacs that you are you created this stuff on your own, you did all the coding on the back end. So Sabrina is definitely more of the technical one, she you know, because of her role over at Apple and being a project manager on a more technical product, she took the lead on the technical side. My background is predominantly in people, right and building the people on my team call me the DM King, predominantly, because I think we have the best STR specific talent in this space. Our team is fantastic. I mean, you look at people like Taylor, who's our head of acquisition, dude is a sniper in the in the short term rental space. John, who's our head of data? He's literally known as the Airbnb data guy. Right? So we built the best possible talent and operational infrastructure in addition to the best technical infrastructure to go out and scale the shit out of this. Yeah, bro, this is insane. All right, let's, let's flip it over now to the second point, which is you're getting into the space because you said you're going to be doing things differently, right? Like this whole thing? You're going to turn it upside down. What do you what did you see that were the issues in the short term space? And what are you doing to correct those issues? I mean, I don't know where to start. And you're Billy, but let's, let's do it. Let's dive into it. You ever go on Airbnb and you look at a home and you're like, my grandma designed this? Yeah, right. Or the photos look like look like it was taken on like an iPhone three back in the day, you know, talking about like this, like, megapixel camera. So you know, the nice thing from an investment perspective in the short term rental spaces 95 98% of the market is Mom and Pop. And while we wish them the best, there's no institutional competition in this space, as you'll find in verses like multifamily and office and industrial, predominantly because no institution has the time or energy or currently want to actually get into the space and start all this from scratch. Right? It's hard, right? If you're if you're an institution, you got $100 million, you want to spend a deploy, it's very easy to put that into an apartment building or if a couple of those, right try doing 100 million and single family short term rentals across eight different markets. That's a company in itself to do right and not your best use of time. So really, what we saw is an opportunity to enter institutionalize a asset class that institutions want to get into, but what they want is they want to roll up. Right? So our business plan is very simple. Buy a bunch of single family homes across several years in several markets and drive you know a t 24 or 24 months plus a really great operational infrastructure in revenue, sell that to a larger private equity firm or family office because they will buy 500 short term rentals, of course, yep. 100% Because the work has been done for them. It's a stabilized deal to some extent at that point. And what's really awesome I think about our business model, and really what we're thinking about is our operational infrastructure becomes a secret sauce to their properties that they acquire. So even when we sell, right, our operating company can actually continue to drive revenue, because most likely they're gonna want to leverage our software, leverage our operating team, because they're gonna, it's gonna they're gonna see it as a risk where, you know, hey, we want us to continue managing it, because clearly you've managed it well. So continue managing it for us. Right. And so that's really where like this long tail wind of continuous residual income kind of continues to try and continue to drive. Right. And of course, we'll capitalize on the equity out that exit for our investors as well. This is insane. I had no idea. I gotta be honest with you. When I read your bio, I did not know this conversation was going to happen because it's, you got you got to update this. I really should. I really should. I'll reach out to Nicole on that. Yeah, yeah, no doubt. I mean, you're what you're saying. It's a brilliant shit, man. Like I'm seeing where this is going to be going. So single family side, you have your software, you're figuring out what markets you have specific states that you're hitting? Are you doing this nationally? Are you doing this globally? Like what does that look like? Yeah, so today, we're fully domestic. While we track 257 markets, we're only in about eight markets today. So that includes places like Scottsdale, Arizona, that includes places like Panama City Beach, as well as like Memphis, Tennessee, or in the Hudson Valley, right closer to you a little bit. And, you know, our strategy on a portfolio basis is very simple. It's half destination markets and half kind of metros. Right destination markets gonna be your cities and mountain towns where people want to get away, right, especially post pandemic, and, you know, metros are gonna be your Scottsdale, your Memphis is Clearwater as an example. But the pandemic changed us all, I think we can all agree for a second, right? remote work is here to stay. People don't want to be cooped up. And look, I lived it, right. Facebook was remote way before all of this happened. And I've always been remote my entire career and always traveling. And people talk about it changing us temporarily, and I'm telling you what changes permanently. We are banking, our investment thesis on this asset class of short term rentals, predominantly, because of the shift in mobility and behavior of the humans population, we are never going to be the same again, where we're going to be in one place. You can get away every weekend, if you want to or every week to a different location, because you're working remote as long as you have an internet connection these days. Yep. And so, you know, these are some of the types of things that we are really excited about in this space. And you know, it's really hard to scale. But that's really the challenge that we're taking on.
Billy 12:42
So this this is interesting, man. So your model? are you leveraging the companies that are out there that Airbnb is now to to do your marketing to draw in the clientele? Are you like, separate yourself from everybody?
Sief 12:55
That's a great question. And I think this is, in my opinion, a myth. And a common topic talked about in this space, people are always like, you know, build your own direct brand, build your own traffic, allow people to come book on your own site. And let me tell you, it's expensive. Oh, yeah, it's expensive to drive your own traffic to drive your own bookings. And for the deal that you're getting on Airbnb, or VRBO, or millbrae.com, it's an absolute no brainer. Now, I'm not saying it's not an auction, right, or you shouldn't supplement it with, right, but what I'm saying is, you can't be good at everything. And I think every good operator knows that. And so if what we're really good at is really good at identifying properties, using technology and data to to, you know, identify which markets to enter, standing them up, we have an incredible operational team that Sabrina leads, right from a design and infrastructure perspective. And we have an incredible revenue and data management team. So we're able to drive the most juice out of the asset as possible and identify it. So because that's our advantage, I could care less if I'm giving Airbnb 3% of the booking, right in order for them to bring the customer who's going to book it. Alright. And honestly, when you look at the data, it shows that it's working. Oh, yeah. 100% I mean, look, you want to go with the eyeballs already are there, they're spending a shitload of money, they have credibility, they have the brand. You just got to link up the brand. But I want to dive in deeper your software. So is your software that you're utilizing on the front end to find the areas that you want to go? Is it also figuring out how to is there an algorithm built in to figure out how to maximize your profit on high weekends, low weekends when stuff is coming to the city or using a third party for that as an overlay? So our software identifies the amenities. Or let me let me take a step back actually, so in each property description, there are words that are used, for example, hot tub, right and when you describe a listing, and so what we're able to do is we're able to correlate the word hot tub to either a higher or lower return. Right. And we can do that with like every word even words like kitchen. And I know kitchens, you think every place that you'd go to would have a kitchen, right? And that's an obvious one, right? But we every single word, we're using machine learning technology to understand what we can map it to in terms of a qualitative understanding towards a quantitative return. And so that's something that we're continuously building and evolving on. Now, I want to be clear that while our software is a great advantage, humans drive the engine. Right? And so John, who's our head of data, Austin, he's our head of revenue, right? They take this data, we do use third party pricing tools, but it's only as good as you make them. Right? I think the average user takes the algorithm and goes with it. But understand that once an algorithm is used by 100,000 people, it becomes the norm, it becomes the standard, right? And so how do you actually pick up on that, and algorithms the end of the day are not humans, we don't believe technology can do everything. Right. And contrary to popular belief, so John and Austin, who are continuously looking at the data and driving revenue and adjusting pricing, right, depending on what our goals are, as a company, and as a portfolio, that's their job. And they've been absolutely exceptional doing so. And that's kind of going back to my point earlier, there's a reason we wanted to build the best talent infrastructure in this space, the data doesn't matter unless you got the people behind it. I just before this podcast, I just interviewed somebody who that's that's his specialty in our space in the investment space, all he does is go out and recruit top talent. And it is I don't care how good your software is, how great your marketing is, what your processes and systems are, if you don't have top talent, you're dead in the water 100% 100%. And that's, that's a big deal for us. Right. And our portfolio management team is, in my opinion, one of the best right in it. And I think you just see it in the returns and the performance, right? Like we've been able to beat expectations by up to 30% on any given month. And that's just been a great performance indicator.
Billy 16:54
Let's let's talk about your structure, how many employees you have right now, more team members do you have right now in your company?
Sief 17:00
Yep. So we're a team of about 24, you know, obviously split between w 220. Net, 1099, etc. All of us are remote. And we're all across the world, the people in Canada, the US overseas. You know, for us, we don't see borders, we see talent. And to us, that's the most important thing. Love it under management. Right. Now I'm going to break out two questions. How many units? Do you guys have like houses? And what's the valuation of the portfolio in the management right now. So we have 61 properties that we have completed, eight of which that have exited. So right now we'll have about 50 ish properties that are quote unquote, live are being worked on. And assets under management on the capital side is going to be right about 20. Equity in general, under management assets value is going to be close to 40 ish. Fantastic. And now on the business itself, because I'm and I may be wrong. But did you break the company out in two tranches where you have the investment pool for your operational business, and then your investment pool if your actual physical real estate piece, you're right on the money, so we took a traditional private equity approach and spun a tech play into it. So we actually have three, not. So we have, we have our tech vestre brand, which is our technology and data and platform and honestly attracts a lot of people that generally have a good amount of money to spend, given, we've worked in this space, and we understand what attracts those types of clients. We have our super host labs brand, which is our operating company, right? That's the brand that actually brings into revenue management and drives the revenue and the data and does it actually interprets all that. And then of course, we have our you know, our business or LLC that holds the assets themselves, also known as a prop Co. in traditional private equity. So for us, we have an opcode, prop CO, and a tech and data solution, all of which that we own collectively,
Billy 18:54
you guys own so when the when the money came in, it was not in the form of debt, it came in the form of equity to each one of these three, three companies beautiful.
Sief 19:02
We've never, we've never raised outside of our fund. We're fully bootstrapped. So Sabrina, and I completely funded the business ourselves. We haven't taken on a single dollar of venture capital or anything, although we've been offered and, you know, for us, you know, I think contrary to popular belief, we didn't want to build a company that would necessarily scale and go public tomorrow. We wanted to build a profitable business from day one, not one that was always chasing growth. The second second, you take on growth capital from a VC, I'm not saying it's a bad choice for us to do. I'm saying the second you do your exit options completely change. It's not it's not it's not about now building something that's sustainable and scalable. It's oftentimes playing to an exit in for us in real estate. You know, we wanted to align our interests with our investors and sustainability was top of mind. Right? So that was highly critical for us.
Billy 19:58
What is your strategy. Talk to us about your strategy to raise capital now to fund your short term rental deals.
Sief 20:06
First and foremost, it's education. It's podcasts like this, we create a lot of a lot of social and blog content. You know, and we talk about our story, we talk about short term rentals, we continuously inform and educate. There are legal ways to raise capital, right, depending on the type of structure that you're in. And I'm sure you've have, you've had several episodes around those types of things that people can refer to, but, you know, go out and invest the money, right in your brand and in your growth. And in your competitive advantage. It's funny, because a lot of people ask me, see how many short term rentals do and and when I tell them, I don't own any personally, they get absolutely shocked. They're like, how, why would you're running a short term rental fund, and I was like, exactly gonna have significant general partnership exposure. Right in that fund. They're like, Well, what do you invest in? I'm like, Well, I'm an LP in mobile, home parks and self storage and multifamily with operators that are significantly better than me in that asset class. Yeah, right. And so I don't sit here and tell you that, hey, like, we're great at everything, we're great at what we do. And that's if you want to get exposure, short term rentals, alternative investments, we think we're a really great choice. But just like that, we know that there are other great operators and every other asset class that we give money to right, and I give money to, to continue my real estate holdings as a whole so that it's nicely diversified as well. What what are some of the reasons some of your investors would want to invest in your fund with your short term rentals versus like, you know, something else? apartment buildings, single family rentals, like, why this fund? Why this type of asset class with your funding? I mean, I think the first thing and this is what we really seen, it's been really kind of a funny journey. Really, a lot of our investments come from multifamily. And the reason is, because it's two completely different strategies. The first competitive advantage we have by nature is our asset class. I don't know how many people you've talked to, but I'll be willing to bet not too many people have a short term rental fund that you talk to, right now, it might be the first well they get it right. And so we're naturally by being different in our asset class. It's an immediate talking point where people are like, Tell me more, right? We're kind of early or educating. That's why we focus a lot on education. The second thing is most other asset classes are typically you know, things have their own things mobile home parks, great for depreciation, multifamily, great for equity, growth and velocity of equity, right and capital to prove an asset class short term rentals. Great for two things, cashflow, and utility, all of our investors get access to us every single one of our properties, right. So if you want something that has utility and lifestyle baked in and better than average yield, short term rentals are going to be something that's going to be really interesting to you right to add to your portfolio and in an inflationary world like we are in today. Cash flow, specifically not cash is king in many ways. And lastly, I think people see that we have the opportunity to hit a grand slam where you don't really see that in other asset classes. If you're investing in an apartment building today, you're not going to get out on a car, when anyone tells you it's unlikely you're gonna get a three or 4x on your equity over three or four years, right? I mean, like, there's nothing that's iconically done there, we have the elements because no one's really scaled this before. We don't know where our ceiling is. Right? So a lot of people see us as an option that has potentially more volatility and more unknown risk, because it's not really been scaled to institutionalize like other asset classes. But that's also kind of the nice part. We don't really have an upside, right, we might sell for three 4x equity, we could or we are we underwriting that we're not one of the very clear, right, we actually underwrite towards a 2x equity multiple over a five year period, generally on average. But can we exit for three or four? Yeah, because there's not really that many options to tell you that we can't multifamily, a never gonna do that. Because everything, everything trades, it's stabilized, you already know. So that's really some of the advantages we have. And honestly, either on the technology and the team and the traction that we've been able to get to. There's a little competition to us is another thing to think about, right? It's if you want to invest in this asset class, you have to do it yourself or you work with people.
Billy 24:25
What kind of returns could an investor expect to make? Let me rephrase that, first of all, what's the minimum investment that you guys will take into your fund? So before
Sief 24:35
I answer any of those questions, obviously, as you know, you already know where this is going. Right? General disclaimer, it's not a solicitation, please do your own advice, all that kind of good stuff. But you know, how we think about our fund is we want it to be accessible. So it's a $25,000 minimum. It's traditionally around a five year hold. We're targeting a 2x equity multiple over a five year period, you know, things that we think are sustainable and attainable, and most of them importantly, it's diversified, right? What's cool with us also is, you know, outside of the lack of liability, right? The traditional GP LP structure is one investment gets you exposure to over 4555 plus assets. versus, you know, in multifamily, you invest 50k, and you get exposure to one asset typically. Are you Are you married, the money that you bring into the fund with traditional financing, or is is 100% funded the purchasing of the properties through your fund, we're absolutely using leverage. And so we are using good debt is what I call it. And that's one of our competitive advantages, in addition, and thank you for bringing that up most multifamily debt and a lot of people don't know this is on like a 311. Schedule, right with floating and variable rates are typically at most a five year period, at best, a five year period, right? Because usually they're gonna stabilize to an extent and so on to the next guy. All of our debt is 10 plus years or longer. And the reason we do that, even though we only have a five year fund or projected five year fund, is because we never want to be forced sellers go back to 2008. What happened was 95% of everything that blew up was because people's backs against the wall equity down floating, floating debt, adjustable rate mortgages, and they lost their they lost their shirt. Yeah, we never want to be in that position. If our worst case scenarios, we got to hold 10 years and collect 678 10 cash on cash. We're sure does that and
Billy 26:24
I gotta tell you, man, very impressed. Very impressed. You got to update this bro had no idea. Completely different direction.
Sief 26:31
I'm taking the feedback Billy Yeah, look, if people want to learn more about you, your software and your investing, like point them in the right direction, they can find us at Tech investor.com. You know, we publish a lot of data and we'll continue to publish them. You know, feel free to stop by not even if you're interested in investing. But if you're looking to learn about short term rentals, my team can help you understand what the world looks like there. We even have an education deck as part of our data room. Right. And the entire part of that deck is just to tell you about the history of short term rentals. We're trying to educate more people about the space and I think short term rentals get a lot of big bad rep because it's taking away affordable housing and these types of things but there's a lot of good that comes with it by providing really fantastic experiences for families and it's not a it's not a place where we throw parties. Right so any questions you have reached out I'm safe@ticketmaster.com and you know anyone on our team is fantastic. They're the real MVP is behind the scenes. Love it brother much success to you. You're young guy bright guy going into I'm anxious to see where this thing is gonna go over the next five to 10 years you it's gonna go like right to the ceiling, bro right through the sky. I appreciate the kind words Billy and thank you so much for having me today on the show. So it's been a pleasure. My pleasure. Likewise, man. Thanks again for coming on. Of course. Take care.