Maximize Your Earnings: Real Estate Arbitrage for Travel Lovers

Michael Stansbury (00:00.244)
Welcome to the Real Estate Pros podcast. I’m Mike Stansbury . Today we have Ali Mae with us. Ali is from San Antonio, Texas. Is that correct? Is that your location, your market right now?

Ali Mae (00:11.595)
Yeah, currently in El Paso actually stationed for the military. I host remote over in San Antonio.

Michael Stansbury (00:18.08)
All right, awesome, awesome. Well, this is the Investor Fuel podcast, the Real Estate Pros Podcast. At Investor Fuel, we help real estate investors, service providers, and real estate entrepreneurs, two to five extra business, to allow them to build the businesses they’ve always wanted and to allow them to live the lives they’ve always dreamed of. Ali May, think the content today that we’re gonna talk about, that I’m excited about, is hostels in America.

Can you tell our audience, are hostiles, if they’ve never heard of it before, if they’ve never been maybe across the pond a little bit, what are hostiles and why do you care about them, Ali?

Ali Mae (00:58.057)
Yeah, sure. So thanks for having me, Michael. I’m really excited to be here today. Hostels are typically something we see more of in Europe and Central and South America. They are these places where you’re seeing kind of a dormitory style room. They’re targeted for the solo traveler. The history around a hostel actually, they were kind of brought up for student housing originally to be able to do like excursions and field trips and things for students that was created by

Educators, but it has really evolved since then it has still really been targeted toward the younger audience But they have evolved and developed we see hostels all around the world that are everything from six dollars a night in a bunk All the way up to kind of a more boutique style hostel. I’ll go ahead and brand that as a postul right here right now so And those could be anywhere, you know from $50 in a dormitory room with a group of people Maybe you’re booking it for your entire

You know bachelorette party all you girls are staying in the dormitory So we do have a few of them here in the United States We just do not have enough basically and we also are seeing I care about them because we’re seeing that The genuine just connection that happens inside of those spaces because hostels are filled with common rooms where you get to hang out There’s game rooms. There’s community kitchens where you get to cook together, especially when you’re from all over different

of the world and you all get to share a meal together, it’s a really amazing experience. So I have traveled throughout my lifetime all over the world and I’ve stayed in multiple hostels and so that is where I’ve created some of the most genuine connections and I just really want to bring more of that to America, to the American traveler, also to really entice more of an accommodation that a European traveler is used to for here in the United States. So that’s really why I care about them and kind of why I’m motivated to

bring more here.

Michael Stansbury (02:58.889)
Okay, so that is what’s on the table for you now. You talked about that. We talked a little bit about it before the podcast, but how did you tell me about how you got started in real estate? What are you doing in real estate? Yeah, tell me about the origin story of Allie Mae.

Ali Mae (03:15.017)
Yeah, so the hostel has always been in the back of my mind, but I was actually a teacher for four years and it was on that last year that I realized I needed to do something different. I needed to have more passive income streams, you know, coming into my life to kind of build up that dream I was hoping to live. And teaching just wasn’t it, you know? So I, was around that time that I knew I needed to get started in real estate if I was going to have a hostel. And so arbitrage actually,

stumbled upon my path and that is when I opened up my first Airbnb arbitrage unit back in February of 2023.

Michael Stansbury (03:55.307)
Okay, so.

Ali Mae (03:55.563)
So really that it evolved from there. Yeah, that first one, really took off. did well. I scaled with another one that same year, July, 2024. then by, or sorry, yeah, July, 2023. And then by 2024, I was scaled to a full eight unit Airbnb arbitrage setup over in this multifamily space. And at that time, I also then implemented a brand and direct booking to really turn it into its own independent boutique arbitrage.

hotel.

Michael Stansbury (04:27.341)
So let’s talk about the benefits for the owner and the property manager there because it seems like there’s layers to this. So what was your pitch? How did you pitch the arbitrage? We’ve seen and talked and know a little bit about Airbnb arbitrage and everybody seems to have maybe a different way to do it. Yours seemed to be a successful enough to where you scaled it. So tell me what that looks like. How did you pitch that?

Ali Mae (04:53.705)
Yeah, so some of our major pitching points were that we have an ordinance there in the city of San Antonio that is very detailed. It’s not necessarily strict, but it is detailed. It’s very regulated to remain in compliance. So when I came in to this property where there had already been arbitrage operators before, I brought this different level of professionalism and awareness around the ordinance. And I even brought in the proper

for how to structure this corporate lease that the property did not yet have with their current arbitrage operators. They were actually all illegal in that building. so bringing in that professionalism and that contracting really helped to sell the owners on that relationship. And then in addition to that, the fact that insurance you have to carry for arbitrage brings a lot more than what they would have with a traditional tenant. So the units are heavily insured compared to traditional. So they really like that as

as well. And then really our third pitching point is that with a short term rental tenant and strategy, you have a lot more traffic, but that also means a lot more cleaning and a lot more maintenance and care for the property than you would have with a traditional tenant. So we’re seeing any damages that occur in that property right away and getting to take care of them right away compared to a traditional tenant that might be in there for year after year. And upon move out, you’re doing thousands of dollars in repair. So all of those things were really

appealing to the property owner. And then of course, I think the ultimate selling piece for the expansion was just seeing that relationship with us, meeting rent on time and things and then they just handed us six more in July 2024. So.

Michael Stansbury (06:37.345)
How about that? Success breeds success. So if you don’t mind, always let people, one of the things, you’re, I have children and one of the things we talked about right away is that we’re gonna share with them how money works, right? And so I’m always interested in, hey, what is arbitrage? How much revenue are you making maybe per deal? Or how would you, how do you define success there in, as far as the dollar amount metric to make sure that obviously you’re,

getting a return on your time and all the systems and processes that you created for this Airbnb arbitrage.

Ali Mae (07:15.839)
Sure, so there’s definitely a lot of language and verbiage around this, like everything from ROI to ADR to RevPAR, right? But for us, we were looking for anything around a 24-month lease that gives us kind of that time period that we’re looking for to make that return on our investment. It’s a bit longer lease than a traditional tenant, which usually offers 12 to 15 months. So I’ve definitely negotiated up to the 24-month lease for myself and then also the other operators that we helped to onboard.

So then also we’re looking at the square footage of the unit and kind of determining from that how much are we going to invest into design and furnishings and then project that analysis across the rental period as well by comparing that with our market analysis that we pull from tools like air DNA and and CoStar to help support What is the market doing right? Is it 35 % occupancy in the market? That’s actually San Antonio’s which it’s really hard to use that as a comparable because

you know, they’re taking everything. They’re taking like all property sizes and even if you’re scaling it just to like mine, which is a one-bedroom suite, they’re taking that from unprofessionally designed, you know, it might be blocked calendars by a host. So there’s discrepancies, but you know, we’re determining it by here’s our rent and utilities. That’s really our only expenses. Everything else gets passed off to a guest and then after that we’re making profit. So we’ve been very successful in one…

know each units we’ve had three now that I’ve done a full t12 and we’ve done 50k on average in each.

Michael Stansbury (09:01.997)
I love that that speaks for itself. and then the so the property manager loves you right because hey they got the at least up your you’re you’re on the hook for the lease and the owner loves you right because you’re taking care of the property a little bit better than a than a long term tenant because you know I understand I’ve had a single family house and had it rented for three years by the same person gone in and seen the damage that they’ve done the dogs the cats and then I have to spend

Ali Mae (09:29.982)
Mm-hmm.

Michael Stansbury (09:31.646)
30K to get it back to rent shape. Where did my profit go? But the Airbnb or the short-term rental model is very nice. You’re going in every week or sometimes every couple of weeks and you’re making sure everything’s taken care of. yeah, I understand why the owner may like that a little bit better as well. So today, tell us about, so your business today is, how did you get those, so you got referred to other,

owners to do more arbitrage? that what I’m hearing?

Ali Mae (10:04.871)
Exactly. Yeah. So from this relationship at our initial property, we were referred to other multifamily owners that our buildings property manager also managed for them. And those property owners were really interested. You know, everybody has their pain point. And so we’re trying to help and bring value to where, you know, where we can help these people. So one of our most recent multifamily owners was struggling to

get occupancy up to where they wanted it to. So we were able to acquire all of the short-term rental available units at that property per our city ordinance and then acquire that relationship and now we’re able to offer all of those units with kind of a done-for-you Airbnb arbitrage facilitation to interested operators that are just starting out in the real estate world. We do have other interested operators that are actually very seasoned and

short-term rental, they’ve done kind of more of the single-family home scene and not so much of the smaller apartment scene. So they’ve actually been able to come in and take multiple units at one time as well. So that’s really what we’ve been able to do now. We really felt that there was a lot of value because, you know, we started, and this is my business partner and myself on this, we started from ground zero on this. So we were doing constant cold calling to apartments and property owners to find out, you know, where we

could do and operate this arbitrage method. And with that you get a lot of owners who are very educated on what arbitrage is and then also single-family homeowners and like traditional landlords that have no idea what it is. You have to spend a lot of time explaining it and trying to sell them on the idea. And then a lot of rejection that comes with that too. And if you’re a first-time operator you really are lacking in like the business credit, you don’t have the LLC established, you don’t have any real estate history. So just being able to

be that bridge for those new operators into this world is where we really felt we could provide that value.

Michael Stansbury (12:11.757)
Okay, so you are gathering people, educating them on the process, you’re solving the biggest, not so fun part is actually trying to get a lead to Freedom Talk to, and so you’re solving that problem because you have people come to you. Now I’m interested because obviously there’s a benefit for you to, why would you not like, I got systems and processes in place, why not just be selfish and take all that yourself?

Ali Mae (12:37.515)
Sure, so that was actually a question by a couple of our interested operators. I drafted up an entire OM around this arbitrage opportunity, which is a little bit non-traditional, right? You see an OM for a property that’s for sale, but I am in a way selling this unit for the owners, right? So I created this whole OM and the numbers are amazing and we’ve got this 59 % cash on cash return for this one apartment. And they’re just like, this is way too good to be true, but it is true.

like why are you not getting your own? And it’s pretty much because our acquisition right now is focused on expanding and buying property, buying commercial real estate, which was always the ultimate goal for me. It was to start in arbitrage and then from there you should see growth and expand your portfolio. I mean, that’s really why I started. was teaching, I needed to expand into other areas. So never really put your eggs in one basket, right? Expand and grow your portfolio where you can.

And so I feel comfortable with the eight arbitrage I have and I’m ready to go ahead and tap into the commercial scene, which separates me from residential and gets access to equity and NOI appraisal value and stuff like that. So.

Michael Stansbury (13:50.542)
Yeah, that, you know what, immediately my head or the gears are turning in the head because commercial property is right now, it’s a difficult kind of asset class right now. And you’ve got this idea of, hey, this works in Europe and this can work here. there’s a lot of proper, I’m just thinking in my head in my hometown in Memphis is that, that could be a neat little niche, turning an old warehouse or,

Let me ask you, Ali, my head’s spinning, but what are you looking for? What kind of property are you looking for to do the hostile commercial type of rental opportunity or commercial opportunity? If you were to paint a picture, what would that picture look like?

Ali Mae (14:39.083)
Yeah, so this is it’s always been in the vision that it’s kind of a centrally downtown super walkable location. We know that if we are a solo traveler, we’re maybe we’re a backpacker, right? That’s more of the European scene, but maybe we’re just a solo traveler. coming in on the train, the AMX or the Amtrak is right there going through Kansas City at Union Station. So we’ve got kind of that connection. If we’re flying in, we’re just, you know, we’re into downtown.

So really looking for that walkable scene that kind of really targets our avatar audience and then just the location in itself, right? We want to just be able to to walk in and be free right and go out your front door and then you’re right there next to the concert venue or whatever So that’s definitely always been part of it So thinking historic as well because I just really think that hostels if you’re thinking about hostels and the boutique hotel scene and then you squish them together they stand out from the traditional

in the fact that they all carry unique amenities and unique design. So really targeting an antique historical building has always been kind of in the projection because, you know, A, they’re super worn down so they need a lot of like work and I’ve always imagined building that up on the inside to create those unique aspects but then also pull in the character and all the charms of the building as well as the local area. So you see those characteristics

of the culture in an area in these older buildings. So my eyes kind of been on, I was there touring a couple like four stories, 1600 square feet, like huge, fully gutted, 120 year old buildings that are like leaking roofs and just totally need so much work. But that’s really the ideal scene, you know, and when it’s all done and renovated, we’re going to walk in the front and we’re going to have this like awesome social space with, you know, some co-working vibes going on as well.

as like coffee situation and grand staircase and going up and seeing these dormitory style rooms. But then common spaces where people are lounging on couches and board games between them. And then there’s a community kitchen and then we’ve got the private suites up on the next floor where we’ve also got another community kitchen, right? To kind of mingle these people and then going up to the roof where we have event space and a container pool up on top where we can also socialize.

Ali Mae (17:08.653)
And then all of that coming together and you walk out the front door and you can walk to your concert at the convention center in like four minutes and get on the metro as well that’s just three blocks away.

Michael Stansbury (17:20.673)
So Ali, knowing what I know about you in the last 17 minutes is that you’ve thought about the numbers on these things because you know your numbers really well. So in old ha you know, I’ve I’m a fix and flipper. And the older the house, the more fun it was. And when I say fun, I’m being sarcastic. But you know, a whole building gutting a whole building obviously requires fantastic vision and then execution. And

Ali Mae (17:39.339)
You

Michael Stansbury (17:50.51)
Have you run numbers yet, got with architects? I think you said that you were just in the beginning stages of it, but what are your expectations as far as how many rooms you’d have in a building or if you were to paint that picture to somebody that wanted to see the vision, how would you do that?

Ali Mae (18:12.073)
Yeah, so we would definitely be looking at kind of one of the floors being those private suites. For this 1600 square foot example, we’d be looking at maybe like seven to eight of those private suites. And then also we’d have mixed in maybe like four of those dormitory style rooms. In most hostels, we’re seeing the mixed rooms and then the private male and female dormitory rooms. So mixing those in. And then of course, I’m pretty excited to bring in some of the capsule pods to the building as well.

We’ve only really seen those pop up recently in like New York and LA. So really bringing that to my ideal potential market right now in the Midwest would be pretty exciting, I think. So that’s kind of how that would look.

Michael Stansbury (18:54.293)
Okay, what are capsule pods? Because I’m a fogie, I guess. Tell me about that.

Ali Mae (18:58.579)
Yeah, I mean, they’re like, I mean, it’s just how you imagine you. You just rent this pod and actually you can rent them for short periods of time just to take a nap. That’s kind of the structure. You can rent them for like four hour periods to do naps in them and then they’ll be turned over and ready for the next napper. So it’s really just the space for the bed and you have all your little, you know, USB plugins and maybe you have LED stars on the ceiling, but it’s just space for your bed and you have a pod that, you know,

Michael Stansbury (19:08.237)
Okay.

Ali Mae (19:28.493)
It’s a stink spaceship style, right? It’s very literal. So yes, we’re excited to implement those. But yeah, like you said, it’s a challenge. They’re actually one of the buildings.

Michael Stansbury (19:33.696)
Okay.

Ali Mae (19:43.111)
It’s amazing. The location is phenomenal. I was asking the realtor and the owner over and over. just like, how is it still here? How has nobody scooped it up? It doesn’t make sense to me because it’s absolutely phenomenal. And they said they’ve had about 14 interested parties over the last like five years that has been listed like tour it. And when they see the amount of work that needs done, a lot of people shy away from that. But to me, I just get so excited. It’s probably not the best quality, but we have, you know, met

with the commercial contractor architect and we’re looking at about a million per floor to get that thing totally flipped. So it’s quite a beast. But the great thing about commercial real estate and turning it, it’s never operated as a hotel before. So the NOI like possibilities on it are just gonna like 10X the appraisal value by the time it’s said and done and operating for a 12 month time. So.

Michael Stansbury (20:21.335)
Right?

Michael Stansbury (20:37.569)
Yeah, so let’s just have fun with it and let’s just throw numbers out there. So acquisition, let’s just say it’s a million bucks to buy it and then it’s two million to get it up and running. So you’re at three million and then you’re out the door, you’re ready, you’re your folks there, your hostels, your folks that want to take that. So let’s say everything goes great, right?

What do you expect the building to be worth if it’s just cranking out?

Ali Mae (21:10.934)
Yeah.

Sure, if we’re roughly working off those numbers you just threw out, then I would anticipate we’d be able to do a sale probably around like $7 million all said and done with those numbers you threw out. But the NOI between, sorry, I forgot to mention there’s going to be a mocktail speakeasy in the basement. So that’s also another stream of revenue that this hostel will have in it. So when you’re including all of the rooms that are available for rent and then the individual beds in the dormitory styles that are available for rent as well as the hourly

Michael Stansbury (21:20.706)
Okay.

Ali Mae (21:42.019)
like capsule pods and then you add in all the additional revenue streams that hotels bring compared to Airbnb’s with like the speakeasy, the coffee shop space. Then with all of that revenue that’s called the kind of your your net operating income right? The building has none right now and so we’re gonna go ahead and like 10x that so we’d be looking at doubling, tripling. I mean I always shoot for kind of an equity multiple of at least two so.

Michael Stansbury (22:08.949)
Right, yeah, that’d be fun. That’s a good foundation. Ali, we got a lot of empty buildings in Memphis, Tennessee. So you may want to come here. All right, so we talked about your business. So let’s talk about you. So you taught for how long? then, yeah, tell us a little bit about you. Separate business, tell us everything else about Ali that we need to know.

Ali Mae (22:16.501)
don’t tease me.

Ali Mae (22:34.795)
Yeah, okay, so originally I am a midwesterner from Lincoln, Nebraska. Studied at the University of Nebraska as a Spanish education major. I went and moved down to Chile for about a year in like 20, oh gosh, probably like 2018, 2019. And then I came back, graduated right at the pandemic, you know, so that kind of looked a little different. I packed up and moved during that time to San Antonio, Texas, where I had never been.

didn’t know I sold, but I knew I was gonna move and go teach. So I packed up, left, sold all my stuff, and drove my car like what, 18 hours south, and started teaching Spanish to high schoolers for the next four years. It was kind of a mixture of traditional teaching and then also doing substitute teaching for those four years. then, yeah, that was around the time that I, you know, throughout all of that and throughout my life, I’ve done about

I’ve 10, 15 years now of international travel, which is really where I have fallen in love with culture, languages especially, and then hostels of course. So that’s really where all of that passion to bring those experiences here has come from. But yes, then when I was teaching, I was just experiencing the real teacher burnout and I’ve always worked two or three jobs at a time, so throughout that I was also still bartending and totally loved bartending.

social aspects of it. But with my time, there was no time for social life. was no really balance, knowing that I always wanted to have a family in the future. So thinking all that in mind, I knew I needed to do something that was passive, something that was going to build actual wealth and build up for my family. so I also then, shortly after I started in the arbitrage world, met my husband. He’s military, so that brought really a whole

new level of what life looks like being a military spouse. But was super stoked for that because I’ve always moved around and have always been very open to it. shortly after then we had our daughter who’s now one years old and we’re expecting our second any day now literally maybe any moment would be really nice.

Michael Stansbury (24:50.685)
Awesome.

Ali Mae (24:56.639)
So yeah, that’s just kind of where we’re at now. Personally, we are actually under contract on an investment property here in El Paso that has, it’s multifamily. So four units, we’ll be living in the main one with three rentals and doing the B &B method. Yep, totally. I mean, I fully do not support paying your own mortgage. Don’t do it, you know, like house hack all the way. And so that’s what we’re doing personally. And then moving forward on the…

Michael Stansbury (25:11.008)
Yes.

Ali Mae (25:26.573)
boutique hostel acquisition currently.

Michael Stansbury (25:29.485)
It’s gonna happen. I I can’t wait to see the first one and and see how it does I know it’s gonna happen So Ali if somebody wanted to get in touch with that, what are your socials? What are your handles? How would somebody get in contact with that? What does that look like Ali?

Ali Mae (25:43.211)
Sure, so on Instagram is definitely the best spot. That’s where you’re gonna connect with me, see my journey, see all the content. It’s at its miss Allie Mae. especially if you’re, excuse me, if you’re looking into doing the, you know, getting into Airbnb arbitrage, getting your foot in the door for real estate, whether you’re military or just any other person in any industry, that’s definitely where you can connect on there on Instagram. So.

Michael Stansbury (26:11.629)
Well, Ali May, thank you. Thank you for joining us for today’s episode. Make sure, folks, that you guys are listening. Subscribe and learn more about Investor Fuel. Have a great rest of your week. We’ll talk to you later.

Ali Mae (26:28.651)
Yeah.